Elcom International, Inc. Reports Second Quarter 2004 Operating
Results NORWOOD, Mass., Aug. 4 /PRNewswire-FirstCall/ -- Elcom
International, Inc. (OTC:ELCOOTC:andOTC:AIM:OTC:ELCOTC:andOTC:ELCS)
(BULLETIN BOARD: ELCO and AIM: ELC and ELCS) , today announced
operating results for its second quarter ended June 30, 2004.
Financial Summary Table (Unaudited) (in thousands, except per share
amounts) Quarter Ended Six Months Ended June 30, June 30, 2004 2003
2004 2003 Net sales $598 $531 $2,307 $1,200 Gross profit 526 396
2,170 871 Operating loss from continuing operations (1,020) (2,129)
(1,090) (4,063) Net loss from continuing operations (1,072) (2,186)
(1,245) (3,631) Net income from discontinued operations -- 423 --
307 Net loss $(1,072) $(1,763) $(1,245) $(3,324) Basic and diluted
net loss per share data: Continuing operations $(0.02) $(0.07)
$(0.03) $(0.12) Discontinued operations -- 0.01 -- 0.01 Basic and
diluted net loss per share $(0.02) $(0.06) $(0.03) $(0.11) Basic
and diluted weighted average common shares outstanding 56,352
30,902 43,631 30,902 The above table, the following description and
the condensed consolidated financial statements should be read in
conjunction with the Risk Factors and other information contained
in the Company's Forms 10-QSB for the periods ended March 31, and
June 30, 2004 and 2003 Annual Report on Form 10-K, as amended. Net
sales for the quarter ended June 30, 2004 increased to $598,000
from $531,000 in the same period of 2003, an increase of $67,000,
or 13%. Professional services revenue increased primarily due an
increase in implementation activities in the U.K. related to the
Scottish Executive's eProcurement Scotland program. Licenses and
associated fees decreased primarily as a result of reduced
licensing activity in the U.S. in 2004 versus 2003. The decrease in
licenses and associated fees was more than offset by the increase
in Professional services revenue. Selling, general and
administrative expenses ("SG&A") for the quarter ended June 30,
2004 were $1,465,000 compared to $2,457,000 in the 2003 quarter, a
decrease of $992,000 or 40%. Throughout the first three quarters of
2003, the Company implemented cost containment measures designed to
align its SG&A expenses with lower than anticipated revenues.
Those measures included personnel reductions throughout most
functional and corporate areas. Reductions in personnel resulted in
a decrease in personnel expense in the second quarter of 2004 of
approximately $333,000 when compared to the second quarter of 2003.
In March 2004, the Company began hiring several support services
staff in the U.K. and U.S. in order to service the expanding demand
in the municipal market in the U.K. and in anticipation of the
funding of the Company via the sale of Regulation S Shares. The
remaining decrease in SG&A from the 2003 quarter to the 2004
quarter is due largely to a reduction in depreciation and
amortization expense, as various Company assets have been fully
depreciated/amortized, as well as credits negotiated with two
service providers which resulted in one-time credits of $196,000 in
the 2004 quarter. The Company reported a $1,020,000 operating loss
from continuing operations for the quarter ended June 30, 2004
compared to a loss of $2,129,000 reported in the comparable quarter
of 2003, a decrease in the reported loss of $1,109,000, or 52%.
This smaller operating loss from continuing operations in the first
quarter of 2004 compared to the 2003 quarter was due to both the
reduction in SG&A and the increase in net sales. The Company's
net loss from continuing operations for the quarter ended June 30,
2004 was $1,072,000, a decrease of $1,114,000 or 51% from the
comparable quarterly loss in 2003 of $2,186,000, as a result of the
factors discussed above. Net sales for the six months ended June
30, 2004 increased to $2,307,000 from $1,200,000 in the same period
of 2003, an increase of $1,107,000. Licenses and associated fees
increased primarily due to recording the fourth and final lump sum
license payment from Capgemini UK Plc ("Capgemini", formerly, Cap
Gemini Ernst and Young UK Plc) of $1,142,000 which was earned upon
signing the thirteenth customer of the eProcurement Scotland
program in the first quarter of 2004 (this license fee is
non-recurring). Professional services fees increased by $114,000,
from $505,000 in 2003 to $619,000 in 2004, reflecting more
implementation work and other professional services activities than
were recorded in the first six months of 2003. SG&A for the six
months ended June 30, 2004 was $3,138,000 compared to $4,807,000 in
the first half of 2003, a decrease of $1,669,000 or 35%. Throughout
the first three quarters of 2003, the Company implemented cost
containment measures designed to align its SG&A expenses with
lower than anticipated revenues. Those measures included personnel
reductions throughout most functional and corporate areas.
Reductions in personnel resulted in a decrease in personnel expense
in the first six months of 2004 of approximately $861,000 when
compared to the first six months of 2003. In March 2004, the
Company began hiring several support services staff in the U.K. and
U.S. in order to service the expanding demand in the municipal
market in the U.K. and in anticipation of the funding of the
Company via the sale of Regulation S Shares. The remaining decrease
in SG&A from the first half of 2003 to the first half of 2004
is due largely to a reduction in depreciation and amortization
expense, as various Company assets have been fully
depreciated/amortized, as well as credits negotiated with two
service providers which resulted in one-time credits of $196,000 in
the 2004 period. In the first half of 2003 the Company's SG&A
expenses were reduced by the reversal of a franchise tax accrual of
$506,000, as payment was no longer deemed probable. The Company
reported an operating loss from continuing operations of $1,090,000
for the six months ended June 30, 2004 compared to a loss of
$4,063,000 reported in the comparable six months of 2003, a
decrease in the reported loss of 73%, or $2,973,000. This smaller
operating loss from continuing operations in the first six months
of 2004 compared to the first half of 2003 was due to both the
reduction in SG&A and the increase in license and associated
fees revenue in the first quarter of 2004, as described above. The
Company's net loss from continuing operations for the six months
ended June 30, 2004 was $1,245,000, a decrease of $2,386,000 from
the $3,631,000 loss reported in the first half of 2003, as a result
of the factors discussed above. Robert J. Crowell, the Company's
Chairman and CEO, stated, "Our second quarter 2004 earnings do not
yet reflect the full anticipated increase in activity under our
agreement with Capgemini associated with the Scottish Executive,
which began late last year. Our 2004 six-month results were
substantially enhanced by the recognition of our final lump sum
payment from Capgemini associated with the Scottish Executive.
Elcom's sales pipeline is still strong but has slowed a bit during
the summer months; however the Company is in the process of
responding to several tender requests and anticipates activity to
accelerate after the summer. I expect to see more activity with our
channel partners and additional opportunities in the municipal
market in the U.K." Factors Affecting Future Performance A
significant portion of the Company's revenues from continuing
operations in the first quarter of 2004 (approximately $1,142,000
after currency conversions) are from recognition of the final lump
sum license fee from Capgemini related to the eProcurement Scotland
program. The eProcurement Scotland program is expected to be an
ongoing source of revenues for the Company; however, because this
was the final lump sum payment and is a non- recurring fee, it is
anticipated the Company's revenues from this source will be lower
in the remaining quarters of 2004. STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT Except for the historical
information contained herein, the matters discussed in this press
release could include forward-looking statements or information.
All statements, other than statements of historical fact,
including, without limitation, those with respect to the Company's
objectives, plans and strategies set forth herein and those
preceded by or that include the words "believes," "expects,"
"targets," "intends," "anticipates," "plans," or similar
expressions, are forward-looking statements. Although the Company
believes that such forward-looking statements are reasonable, it
can give no assurance that the Company's expectations are, or will
be, correct. These forward-looking statements involve a number of
risks and uncertainties which could cause the Company's future
results to differ materially from those anticipated, including: (i)
the Company's history of ongoing operating losses; (ii) the overall
marketplace and client's acceptance and usage of eCommerce software
systems, specifically the Company's PECOS eProcurement and
eMarketplace systems and demand thereof by public sector
organizations in the U.K., both under the Company's contract with
Capgemini plc (U.K.) associated with the Scottish Executive and by
municipalities in England, the impact of competitive technologies,
products and pricing, particularly given the substantially larger
size and scale of certain competitors and potential competitors,
and control of expenses, revenue growth, corporate demand for
eProcurement and eMarketplace solutions; (iii) the consequent
results of operations given the aforementioned factors; and (iv)
the possibility that the Company's revenues may not reach the level
necessary to support positive cash flow during 2005 and if so, the
Company's need to raise additional working capital to fund
operations in the future; and (v) the availability and terms of any
such funding to the Company, if available, and other risks detailed
from time to time in the Company's Annual Report on Form 10-K, as
amended, filed on May 10, 2004, in its Forms 10-QSB for the first
and second quarters of 2004, and its other SEC reports and
statements. The Company assumes no obligation to update any of the
information contained or referenced in this press release. AT THE
COMPANY: Investor Relations E-mail: The financial data set forth
below should be read in conjunction with the Consolidated Financial
Statements and other disclosures contained in the Company's 2003
Annual Report on Form 10-K, as amended and Forms 10-QSB for the
periods ended March 31, and June 30, 2004 (which the Company plans
to file within the next five days). CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share
data) Three Months Ended Six Months Ended June 30, June 30, 2004
2003 2004 2003 Net sales $598 $531 $2,307 $1,200 Cost of sales 72
135 137 329 Gross profit 526 396 2,170 871 Operating Expenses:
Selling, general and administrative 1,465 2,457 3,138 4,807
Research and development 81 68 122 127 Total operating expenses
1,546 2,525 3,260 4,934 Operating loss from continuing operations
(1,020) (2,129) (1,090) (4,063) Interest and other income
(expense), net 9 (23) (25) (19) Interest expense (61) (34) (130)
(41) Net loss from continuing operations before tax (1,072) (2,186)
(1,245) (4,123) Income tax benefit -- -- -- 492 Net loss from
continuing operations (1,072) (2,186) (1,245) (3,631) Discontinued
operations: Net income from discontinued operations, net of tax --
423 -- 307 Net income (loss) $(1,072) $(1,763) $(1,245) $(3,324)
Basic and diluted net income (loss) per share data: Continuing
operations $(0.02) $(0.07) $(0.03) $(0.12) Discontinued operations
-- 0.01 -- 0.01 Basic and diluted net loss per share $(0.02)
$(0.06) $(0.03) $(0.11) Weighted average number of basic and
diluted shares outstanding 56,352 30,902 43,631 30,902 CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands) June 30,
December 31, 2004 2003 ASSETS CURRENT ASSETS: Cash and cash
equivalents $1,645 $515 Accounts receivable, net 277 1,027 Prepaids
and other current assets 175 43 Current assets of discontinued
operations 24 -- Total current assets 2,121 1,585 PROPERTY,
EQUIPMENT AND SOFTWARE, NET 447 783 OTHER ASSETS 10 15 NON-CURRENT
ASSETS OF DISCONTINUED OPERATIONS 80 80 $2,658 $2,463 LIABILITIES
AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Loans payable $--
$1,113 Other current liabilities 2,853 3,374 Current liabilities of
discontinued operations 338 444 Total current liabilities $3,191
$4,931 Convertible debentures, net of discount 308 254 Total
liabilities 3,499 5,185 TOTAL STOCKHOLDERS' DEFICIT (841) (2,722)
$2,658 $2,463 DATASOURCE: Elcom International, Inc. CONTACT:
Investor Relations of Elcom International, Inc., Web site:
http://www.elcom.com/
Copyright