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ZEOS INTERNATIONAL, LTD. REPORTS RESULTS FOR FOURTH QUARTER AND YEAR

 MINNEAPOLIS, Feb. 19 /PRNewswire/ -- ZEOS International, Ltd. (NASDAQ: ZEOS) announced today that for the quarter ended Dec. 31, 1992, it recorded a pretax loss of $5.9 million after $1.1 million of non- recurring charges, and a net loss of $7.2 million or $.83 per fully diluted share on net sales of $46.9 million. The company's results for the fourth quarter of 1992 showed improvement over the third quarter, in which the company reported a loss of $8.1 million, both pretax and net, including $1.0 million of charges for the consolidation of facilities, or $.94 per fully diluted share on net sales of $51.4 million. Net sales for the fourth quarter of 1991 were $70.6 million, with pretax earnings of $4.9 million and net earnings of $3.2 million or $.33 per fully diluted share.
 For the year ended Dec. 31, 1992, the company reported a net loss of $28.2 million or $3.28 per fully diluted share on net sales of $206.1 million. Net sales for 1991 were $230.9 million, and net earnings were $10.3 million or $1.31 per fully diluted share. The company ended 1992 with cash and equivalents totaling $10.7 million, an increase of $2.7 million over the end of its third quarter of 1992, net working capital of $31.7 million and no outstanding short-term borrowings or long-term debt.
 During the fourth quarter, net sales from the company's traditional sources increased, while net sales to the mass merchant channel declined. The company's sales mix by distribution channel for the fourth quarter of 1992 consisted of approximately 98 percent from its traditional sources, most notably the direct marketing channel, and 2 percent from the mass merchant channel, compared to 72 percent and 28 percent from traditional and mass merchant channels, respectively during the third quarter. Reflecting its strategic decision to de- emphasize the mass merchant channel, the company does not expect that channel to be a significant source of revenue during the first quarter of 1993. Sales mix by product category for the fourth quarter of 1992 consisted predominantly of desktop products, with the balance consisting of transportable computer products and non-systems revenue.
 As part of its continuing program to streamline operations, reduce costs and focus on its primary business activities, the company announced that it is discontinuing the operation of its separate telemarketing subsidiary in the Netherlands and will continue to service its European customers through the company's U.S.-based telemarketing center. In addition, operations that manufacture, market and support the company's low-priced line of personal computers sold under the "Occidental Systems" brand are being merged into the company's principal operations, where the Occidental Systems brand will be sold as a separate line of ZEOS products. Included in the company's net loss for the fourth quarter are charges totaling $1.1 million or $.12 per share related to the discontinuation and consolidation of these separate operations.
 "While the marketplace remains intensely competitive, our fourth quarter operating results demonstrate that considerable, continued progress has been made over the most recent previous quarters to enhance our operational and financial foundations. During the fourth quarter and into the present, we have made significant progress toward refocusing the company on its core business strategies, strengthening our management team, launching major, new product offerings and improving our financial strength and liquidity," stated Gregory E. Herrick, ZEOS International chairman and chief executive officer.
 "We continue to demonstrate our ability to introduce exceptional products while anticipating the needs of the most demanding personal computer users. During the fourth quarter the company began delivery of its Freestyle notebook product, and in early 1993 we launched an entirely new line of desktop systems at new lower prices as well as an exciting new subnote computer system called the 'Contenda.' These new product offerings have already received enthusiastic praise from industry experts. Our 486DX-33 desktop system received PC World magazine's 'BEST BUY' award and was cited as 'fastest 33 Mhz 486DX tested.' The ZEOS 486DX2-66 desktop system was named 'BEST VALUE' by PC Computing Magazine, while PC Magazine referred to its video performance as 'stunning,' calling the system 'the standout ... that blew all competitors away.' And PC Week has already called our new Contenda subnote 'the best yet of the new crop of lightweight full- featured machines' in a comparison with products from Dell Computer Corporation and Gateway 2000."
 Herrick continued: "Meanwhile, we have continued to take measures to build our financial strength. During the fourth quarter, as previously announced, we successfully established a new $12.5 million revolving credit facility which replaced another expiring line of credit. This new facility, combined with our improved cash position of $10.7 million at Dec. 31, 1992, a current ratio of 2.0:1, a significant tax benefit receivable and no outstanding short-term borrowings or long-term debt of any kind, provides us with the liquidity necessary to continue in our efforts to address the challenges ahead."
 ZEOS International, Ltd., headquartered in Minneapolis, manufactures and markets, direct to end users, ISA and EISA (Industry Standard Architecture and Extended Industry Standard Architecture) personal computer systems and workstations based on the Intel 80486SX, DX and DX2 microprocessors worldwide. The company also provides contract product design services through its PC Tech subsidiary.
 ZEOS INTERNATIONAL, LTD.
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 Three Months Ended 12 Months Ended
 12/31/92 12/31/91 12/31/92 12/31/91
 Net sales $46,904 $70,626 $206,126 $230,913
 Cost of sales 41,876 53,437 195,579 176,004
 Gross margin 5,028 17,189 10,547 54,909
 Selling and marketing expenses 6,175 9,906 29,892 28,296
 General and administrative
 expenses 3,191 2,279 10,042 8,683
 Research and development
 expenses 1,582 381 4,870 2,007
 Operating profit (loss) (5,920) 4,623 (34,257) 15,923
 Interest expense 2 25 10 213
 Investment income (9) (332) (508) (528)
 Earnings (loss) before
 income taxes (5,913) 4,930 (33,759) 16,238
 Provision for income taxes 1,248 1,770 (5,562) 5,952
 Net earnings (loss) $(7,161) $3,160 $(28,197) $10,286
 Earnings (loss) per common
 and common equivalent share:
 Primary $(.83) $.33 $(3.28) $1.33
 Fully diluted $(.83) $.33 $(3.28) $1.31
 Weighted average common and
 common equivalent shares:
 Primary 8,632 9,446 8,585 7,756
 Fully diluted 8,632 9,449 8,585 7,923
 ZEOS INTERNATIONAL, LTD.
 CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 (Dollars in thousands, except per share amounts)
 12/31/92 12/31/91
 Assets:
 Current assets
 Cash, cash equivalents and
 short-term investments $10,682 $24,662
 Accounts receivable, net of allowance
 for doubtful receivables 14,164 16,807
 Inventories 30,721 51,214
 Income taxes receivable 6,420 --
 Other current assets 1,329 2,880
 Total current assets 63,316 95,563
 Property and equipment, net 4,746 3,619
 Other assets 513 877
 -- $68,575 $100,059
 Liabilities and shareholders' equity:
 Current liabilities
 Short-term bank borrowings $0 $0
 Accounts payable 20,253 26,396
 Other current liabilities 11,404 9,103
 Total current liabilities 31,657 35,499
 Deferred income taxes 200 153
 Shareholders' equity
 Common stock: .01 par value per share;
 authorized: 15,000,000 shares; issued
 and outstanding: 8,650,964 and
 8,512,686 shares, respectively 87 85
 Additional paid-in capital 48,506 48,000
 Retained earnings (deficit) (11,875) 16,322
 -- 36,718 64,407
 -- $68,575 $100,059
 -0- 2/19/93
 /CONTACT: John Bakewell, chief financial officer of ZEOS, 612-362-1970; or Roy Winnick or Kekst and Company, 212-593-2655, for ZEOS/
 (ZEOS)


CO: ZEOS International, Ltd. ST: Minnesota IN: CPR SU: ERN

KH -- MN002 -- 8253 02/19/93 07:59 EST
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Date:Feb 19, 1993
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