Elcom International, Inc. Reports First Quarter 1998 Revenues and Net Income.NORWOOD, Mass.--(BUSINESS WIRE)--May 5, 1998--Elcom International, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :ELCO ELCO Eastern Lebanon County (school district, Pennsylvania) ELCO El Camino ELCO Electrolytic Capacitor ELCO Early Opening Local Census Office ELCO Electronic Company ), today announced revenues and net earnings for the first quarter ended March 31, 1998. Reported Highlights: --Net sales increased 8% in the first quarter ("Q1") of 1998 to $190 million from $176 million in the 1997 quarter. --Operating profit in Q1 1998 increased 13% to $4.02 million from $3.56 million in Q1 1997. --Net income for Q1 1998 was $1.37 million, or $.05 per share, compared to $1.96 million, or $.07 per share in Q1 1997. -0-
Financial Summary Table
(Unaudited)
(in thousands, except per share amounts)
First Quarter (Q1)
Ended March 31,
1998 1997
Net Sales $190,048 $176,279
Gross Profit $ 22,154 $ 20,202
Gross Profit Percentage 11.7 % 11.5 %
Operating Profit $ 4,021 $ 3,559
Net Income $ 1,372 $ 1,962
Basic Net Income Per Share $ .05 $ .07
Basic Weighted Average Shares
Outstanding 27,230 26,739
Diluted Net Income Per Share $ .05 $ .07
Diluted Weighted Average Shares
Outstanding 28,802 29,519
-0- Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the first quarter ended March 31, 1998 were $190 million versus net sales of $176 million in the comparable quarter of 1997. The Company's operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. increased from $3.56 million in Q1 1997 to $4.02 million in Q1 1998, despite a $0.32 million increase in operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. at Elcom Systems, the Company's technology subsidiary. Excluding Elcom Systems' operating losses, the Company's operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased 22%. Net income for the quarter ended March 31, 1998, amounted to $1.37 million, compared to net income of $1.96 million in the 1997 quarter. Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net income per share for the 1998 quarter was $.05, a decrease of 29% compared with diluted net income of $.07 per share in the 1997 quarter. Robert J. Crowell, Elcom International's Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. stated, "Our first quarter results reflect several issues relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc top-line revenue growth and industry price cutting. First quarter revenues are historically soft in the U.S. and we believe this softness was exacerbated by customers delaying purchases in anticipation of further price decreases from major manufacturers, several of which occurred during the month of March. Although the Company's volume of personal computers shipped to customers showed more than 30% growth compared to the same period last year, these price decreases had a significant effect on the average unit value of personal computers sold as well as the Company's net sales compared to last year. Despite this effect, the Company's overall revenue is up from last year and our U.S. operations are regaining momentum from the effects of implementing an enterprise-wide, Oracle-based, management information system ("MIS") in the U.S. in November 1997. The Company believes that its revenues in the first quarter in the U.S. were effected by this MIS implementation but expects continuing improvement in MIS-related efficiencies which it believes will positively effect the U.S. operations during 1998." The Company noted that earnings were also impacted by higher interest expense incurred in Q1 1998 vs. Q1 1997 and a larger operating loss posted by Elcom Systems as it readies its new Intranet-based automated au·to·mate v. au·to·mat·ed, au·to·mat·ing, au·to·mates v.tr. 1. To convert to automatic operation: automate a factory. 2. procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. system product for market. Mr. Crowell stated further, "Although selling and general administrative expenses increased $1.5 million from Q1 last year, expenses remained essentially flat relative to the fourth quarter of 1997. To the extent our MIS system continues to improve and provide the efficiencies we expect, our operational and sales productivity is expected to improve in the U.S. We can now redirect re·di·rect tr.v. re·di·rect·ed, re·di·rect·ing, re·di·rects To change the direction or course of. n. A redirect examination. re our primary focus in the U.S. from building infrastructure to product and service revenue development." Conrad Bringsjord, Salomon Smith Barney's Managing Director, Advisory Group, said, "Although our engagement is taking longer than originally anticipated to finalize fi·nal·ize tr.v. fi·nal·ized, fi·nal·iz·ing, fi·nal·iz·es To put into final form; complete or conclude: "They have jointly agreed ... , we remain optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that Elcom International has various options available to it and Salomon Smith Barney Smith Barney is a division of Citigroup Global Capital Markets Inc., a global, full-service financial firm, that provides brokerage, investment banking and asset management services to corporations, governments and individuals around the world. remains committed to assist Elcom International to evaluate its strategic options." Mr. Crowell stated further, "Finalizing on a particular strategic option is taking longer than we thought; however, we are continuing ongoing discussions with several companies. As long as the Board of Directors believes that such discussions may lead to a merger, acquisition, or other potential financial arrangement which would be, in the Board's opinion, in the best interests of the stockholders, these discussions will continue. Further, due to the size and scale of the Company's PC remarketing and services business in the U.K. and the current strength of the U.K. stock market, particularly for information technology stocks, the Company and Salomon Smith Barney are evaluating alternative options which are intended to take advantage of this strength." The Company also announced that its continuing investment in Elcom Systems, the Company's technology subsidiary, has resulted in the availability of Procurement Manager, Elcom Systems' new Automated Procurement Solution which enhances and extends its current range of e-commerce solutions. "We believe PECOS.pm (Procurement Manager) will position Elcom Systems as a significant player in the emerging Intranet-based Automated Procurement Systems arena," added Mr. Crowell. Elcom Systems recently announced the commercial availability of PECOS.pm and, with the rapid emergence of interest in the area of automated procurement, Elcom Systems expects to focus much of its efforts in this area during 1998. In conjunction with its continuing evaluation of strategic alternatives, the Company is currently investigating the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of a majority share of Elcom Systems. The Company's objective is to reduce its holdings in Elcom Systems to less than 50% in order to allow it to account for its ownership via the equity method and therefore not report subsequent operating losses incurred by Elcom Systems beyond its residual investment therein, if any. This will allow Elcom Systems to operate as a stand-alone company stand-alone company An independent operating firm. For example, a large diversified firm may consider spinning off a subsidiary because, as a stand-alone company, the subsidiary would command a higher price-earnings ratio than the parent. able to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. the losses necessary to brand and market a significant new software product. Elcom International, Inc., through two wholly-owned subsidiaries, develops, licenses, and uses client/server, transaction-based software systems which enable the conduct of PC-based interactive electronic commerce over private and/or Internet Protocol See Internet and TCP/IP. (networking) Internet Protocol - (IP) The network layer for the TCP/IP protocol suite widely used on Ethernet networks, defined in STD 5, RFC 791. IP is a connectionless, best-effort packet switching protocol. networks. Catalink Direct, the Company's PC remarketing subsidiary, uses the Company's electronic commerce technology to support the marketing of PC products and operates 14 field sales and support offices in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and 7 in the United Kingdom. Elcom Systems, the Company's technology subsidiary, licenses PECOS and PECOS Procurement Manager to other companies. Statement Under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and Except for the historical information contained in this release, the matters described herein contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks and uncertainties which might cause the results of such forward-looking statements to differ materially from those anticipated. Such risks and uncertainties include: the industry's acceptance and usage of electronic commerce software systems, the impact of competitive technology products, service providers, and pricing, control of expenses, levels of gross profits, revenue growth, overall business conditions, price decreases of PC products, corporate demand for PC products, the success and timing of fully implementing the Company's new management information system and problems associated therewith there·with adv. 1. With that, this, or it. 2. In addition to that. 3. Archaic Immediately thereafter. Adv. 1. , availability of appropriate financing, risks associated with acquisitions of companies, the consequent con·se·quent adj. 1. a. Following as a natural effect, result, or conclusion: tried to prevent an oil spill and the consequent damage to wildlife. b. results of operations given the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. factors, and other risks detailed in the Company's Annual Reports on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and from time to time in the Company's other SEC reports, including the Company's prospectus included as part of the S-1 Registration Statement declared effective on December 19, 1995 under the Securities Act of 1933. Regarding the Company's evaluation of possible strategic partners and financing alternatives, including for Elcom Systems, there can be no assurance that any strategic alternatives, including any possible arrangements with a strategic partner or a possible sale, merger or financing, can be successfully identified or solicited, negotiated, or consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. to the betterment bet·ter·ment n. 1. An improvement over what has been the case: financial betterment. 2. Law An improvement beyond normal upkeep and repair that adds to the value of real property. of the Company or the Company's stock price, or what the timing, terms, or ultimate impact of any such arrangement might be. The financial data set forth below should be read in conjunction with the Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge and other disclosures contained or to be contained in the Company's Annual Report on Form 10-K for 1997, as well as the Company's quarterly reports on Form 10-Q Form 10-Q See 10-Q. filed with the SEC during 1997 and 1998. The Company intends to file its March 31, 1998 10-Q on May 8, 1998. -0-
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
Three Months Ended
March 31,
1998 1997
Net sales $ 190,048 $ 176,279
Cost of sales 167,894 156,077
------- -------
Gross profit 22,154 20,202
Expenses:
Selling,
general and
administrative 17,858 16,368
Research and
development 275 275
--- ---
Total expenses 18,133 16,643
----------- -----------
Operating profit 4,021 3,559
Interest expense
and other, net (1,771) (570)
----- ---
Income before
income taxes 2,250 2,989
Provision for
income taxes 878 1,027
--- -----
Net income $ 1,372 $ 1,962
========== ===========
Diluted net
income per share $ .05 $ .07
=== ===
Diluted weighted
average common
shares outstanding 28,802 29,519
-0-
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
March 31, December 31,
1998 1997
-------------- ----------------
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents $ 36,798 $ 33,165
Accounts receivable,
net 186,218 180,949
Inventory 68,189 60,437
Prepaids and other
current assets 3,753 3,255
----- -----
Total current
assets 294,958 277,806
------- -------
PROPERTY, EQUIPMENT
AND SOFTWARE, NET 17,083 16,450
------ ------
GOODWILL AND OTHER
ASSETS, NET 37,511 37,812
------ ------
$ 349,552 $ 332,068
=========== ===========
-0-
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Lines of credit $ 144,563 $ 154,714
Other current
liabilities 89,155 63,586
------ ------
Total current
liabilities 233,718 218,300
------- -------
LONG-TERM
LIABILITIES 3,293 3,465
----- -----
TOTAL
STOCKHOLDERS'EQUITY 112,541 110,303
------- -------
$ 349,552 $ 332,068
=========== ===========
-0- CONTACT: Elcom International, Inc. Tom Barth, 781/440-3333 x4094 www.elcominternational.com |
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