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ZEOS INTERNATIONAL REPORTS FIRST QUARTER RESULTS

 ZEOS INTERNATIONAL REPORTS FIRST QUARTER RESULTS
 ST. PAUL, Minn., May 12 /PRNewswire/ -- Zeos International, Ltd.,


(NASDAQ: ZEOS) announced today that for the quarter ended March 31, 1992, it recorded a net loss of $1.9 million or $.22 per fully diluted share on net sales of $59.1 million. Net sales for the comparable 1991 period were $59.2 million and net earnings were $2.4 million or $.35 per fully diluted share. For the fourth quarter of 1991, net earnings were $3.2 million or $.33 per fully diluted share on net sales of $70.6 million.
 The company attributed the first-quarter decline in net sales and earnings primarily to intense competition in the personal computer business generally and the direct-marketing sector in particular, which, as previously indicated, has resulted in downward pressure on prices and gross margins. In addition, and also as previously indicated, during the first quarter Zeos was in a transitional phase between product cycles on certain existing product lines and had not yet introduced several new product lines slated for introduction beginning later this year.
 "It's no secret that the personal computer business is currently going through a period of intense competition that is unavoidably impacting our financial performance as well as others in the industry. We highlighted this fact and the impact we expected it to have on our first quarter in our year-end press release in February," stated Gregory E. Herrick, Zeos International chairman and chief executive officer.
 "Although we experienced some increases in sales and marketing expenses and research and development expenses during the first quarter of 1992 compared to the first quarter of 1991, we have avoided significant increases in overhead and in fact have reduced operating expenses by $1.2 million compared to the fourth quarter of 1991," said Herrick. We are now reviewing our product costs and other expenses to identify ways in which we can respond more effectively to the price competition which is currently driving the market for our system products."
 The company reported that its sales mix for the first quarter of 1992 consisted of approximately 69 percent from desktop products, 21 percent from notebook products and 10 percent from non-systems revenue, as compared to approximately 55 percent, 42 percent and 3 percent, respectively, in the first quarter of 1991. The decreased contribution by the company's notebook products reflected drops in both the unit volume and selling price of Zeos notebook products as growth in the market products leveled off, price competition increased and the Zeos notebook line matured. In addition, the company experienced a shortage of its most popular notebook product during the first half of the first quarter of 1992.
 Zeos also reported that as of March 31, 1992, it had $14.3 million in cash, cash equivalents and short-term investments, and no outstanding bank borrowings or long-term debt. In addition to these funds, the company's principal source of liquidity is a $16 million revolving line of credit with a bank.
 Herrick said, "With our strong balance sheet, we believe that Zeos is far better situated than many of our competitors to weather the challenging conditions that currently prevail throughout our industry. Once our new products are on line and generating revenue, we believe our revenue and earnings performance should return to acceptable levels. We currently anticipate that the impact of the first of these new products, a new notebook line that will be introduced later this year, will begin to be reflected in our financial results for the third quarter of 1992.
 Separately, Zeos announced today that it has entered into a vendor agreement with Sam's Wholesale Club, a nationwide 215-store membership warehouse chain that is a division of Wal-Mart Stores Inc. Under the terms of the arrangement with Sam's Wholesale Club, Sam's will distribute a new line of Zeos computers, called Zeos Performance Systems, developed specifically for small business and home office customers who purchase systems through mass merchandising channels.
 Zeos International, Ltd., headquartered in St. Paul, manufactures and markets, direct to end users, ISA and EISA (Industry and Extended Industry Standard Architecture) personal computer systems and workstations based on the Intel 80386 and 80486 microprocessor families worldwide under the Zeos name. The company also provides engineering services through its PC Tech electronic design group and contract manufacturing services under the name NPC Electronics, and distributes passive electronic components through its Parts1 distribution division.
 ZEOS INTERNATIONAL, LTD.
 First Quarter Ended March 31
 (In thousands, except per-share amounts)
 Three Months Ended
 3/31/92 3/31/91
 Net sales $59,051 $59,232
 Cost of sales 51,340 45,915
 Gross profit 7,711 13,317
 Selling and marketing expenses 8,305 6,279
 General and administrative expenses 2,047 2,549
 Research and development expenses 996 494
 Operating profit (loss) (3,637) 3,995
 Interest expense 6 111
 Investment income (317) (14)
 Earnings (loss) before income taxes (3,326) 3,898
 Provision for income taxes (1,419) 1,462
 Net earnings (loss) $(1,907) $2,436
 Earnings (loss) per common
 equivalent share:
 Primary $(.22) $.37
 Fully diluted $(.22) $.37
 -0- 5/12/92
 /CONTACT: John Bakewell of Zeos, 612-635-1419, or Roy Winnick or Jeremy Weitbas of Kekst and Company, 212-593-2655/
 (ZEOS) CO: Zeos International, Ltd. ST: Minnesota IN: CPR SU: ERN


AL -- MN016 -- 9356 05/12/92 17:12 EDT
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Date:May 12, 1992
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