Zoom Technologies Reports Results for the Fourth Quarter of 200510 February 2006
Zoom Technologies, Inc. (NASDAQ: ZOOM), aleading manufacturer of modems and other data communication products, todayreported net sales of $7.3 million for its fourth quarter ended December31, 2005, down 13.2% from $8.4 million for the fourth quarter of 2004.Zoom's net ADSL modem sales showed an 11% year over year growth to $4.6million in the fourth quarter of 2005. Zoom reported a net loss of $0.9million or $.09 per diluted share for the fourth quarter of 2005, comparedto a net loss of $0.9 million or $.10 per diluted share for the fourthquarter of 2004.
Gross profit was $1.2 million or 16.9% of net sales in the fourth quarterof 2005, down from $2.0 million or 23.9% of net sales in the fourth quarterof 2004. The reduced gross profit resulted primarily from the reduction insales and from lower gross margin on those sales. Gross margin was lowerdue the negative effect of manufacturing overhead spread over lower sales,the shift of Zoom's product mix away from dial-up modems, Zoom's highestmargin product category, and the lower proportion of Zoom's sales throughretailers. Zoom's retailer business typically provides higher margins andhigher selling expenses than Zoom's business through its distributor,service provider, and OEM customers.
Operating expenses were $2.2 million or 29.7% of net sales in the fourthquarter of 2005 compared to $3.0 million or 35.4% of net sales in thefourth quarter of 2004. Selling expenses dropped $0.4 million, primarilydue to lower personnel costs, lower freight costs, and lowerretailer-related selling expenses. General and administrative expensesdropped $0.1 million, primarily due to lower personnel costs partiallyoffset by a $77 thousand increase in the bad debt reserve for a Europeancustomer. R&D expenses declined by $0.3 million, primarily due to lowerpersonnel and government approval costs.
Zoom's cash balance on December 31, 2005 was $9.1 million, down from $9.4million on December 31, 2004. The $0.3 million reduction in cash wasprimarily due to a $2.1 million net loss for the year offset partially by areduction in net accounts receivable of $0.7 million and an increase inaccounts payable and accrued expenses of $0.6 million. Zoom's December 31,2005 balance sheet classifies the $4.9 million mortgage on its headquartersbuildings as a current liability since the mortgage was fully due inJanuary 2006. As previously reported, Zoom is in discussions withWainwright Bank, the mortgage lender, to refinance all or a portion of theloan, and both parties have agreed that this mortgage balloon payment willbe deferred while these discussions continue. There can be no assurance asto the outcome of these negotiations.
"We are encouraged by the growth in our DSL business, and by the fact thatin Q4 our DSL sales were more than double ourdial-up modem sales," said Frank Manning, Zoom's President and CEO. "Weremain committed to a strong dial-up modem product line, but our productdevelopment focus is on DSL and voice over IP. We expect to make a numberof exciting new product announcements in the coming months in these areas.Zoom has unusually strong VoIP expertise, and our goal for 2006 is to turnour technology leadership position into significant new VoIP revenues andcustomers."
Zoom has scheduled a conference call for Thursday, February 9th at 9:00a.m. Eastern Time. You may access the conference call by dialing(800) 289-0436 for calls made within the United States and dialing (913)981-5507 for calls made from outside the United States. The call will alsobe simulcast to stock analysts and other interested parties on Zoom'swebsite (www.zoom.com/Q4) and other financial and investor-orientedwebsites via the CCBN/StreetEvents network. Shortly after the conferencecall, a recording of the call will be available on Zoom's website. Foradditional information, please contact Investor Relations, ZoomTechnologies, 207 South Street, Boston, MA 02111, telephone (617) 423-1072,email investor@zoom.com, or visit Zoom's website at www.zoom.com.
About Zoom Technologies
Zoom Technologies, Inc. designs, produces, markets, and supportscommunications products under the Zoom and Hayes® brands, and providesvoice over the Internet services under the Global Village brand. Zoom isheadquartered in Boston, and its European sales and support center is inthe UK. Zoom markets its products in over forty countries, and providesmulti-lingual support from its offices in Boston, Florida, and the UK. Formore information about Zoom and its products, please see www.zoom.com.
Forward Looking Statements
This release contains forward-looking information relating to Zoom's plans,expectations, and intentions, including statements relating to Zoom's DSL,VoIP, and other products and product developments, and Zoom's goals andexpectations for 2006, including its ability to turn its VoIP technologyleadership position into significant new VoIP revenues and customers.Actual results may be materially different from expectations as a result ofknown and unknown risks, including: the uncertainty of market acceptanceand growth of VoIP and of DSL modem markets; the uncertainty of Zoom'sability to grow its sales or more successfully penetrate those markets;Zoom's reliance on a relatively limited number of customers for sale of itsDSL modems; Zoom's increasing reliance on international sales; theuncertainty of the regulatory environment of VoIP products; uncertainty ofnew product development and introduction, including budget overruns,project delays, and the risk that newly introduced products may containundetected errors or defects or otherwise not perform as anticipated; otherdelays in shipments of products; Zoom's dependence on one or a limitednumber of suppliers for certain key components; rapid technological change;competition; changes in and other risks set forth in Zoom's filings withthe Securities and Exchange Commission. Moreover, Zoom cannot assure thatit will be able to refinance all or a portion of its mortgage on favorableterms if at all. Zoom cautions readers not to place undue reliance upon anysuch forward-looking statements, which speak only as of the date made. Zoomexpressly disclaims any obligation or undertaking to release publicly anyupdates or revisions to any such statements to reflect any change in theZoom's expectations or any change in events, conditions or circumstance onwhich any such statement is based.
ZOOM TECHNOLOGIES, INC. Consolidated Balance Sheets In thousands (Unaudited)
Dec 31, Dec 31, 2005 2004 -------- --------
ASSETS
Current assets:
Cash $ 9,081 $ 9,439 Accounts receivable, net 2,631 3,349 Inventories 5,073 5,031 Prepaid expenses and other current assets 301 530 -------- --------
Total current assets 17,086 18,349
Property and equipment, net 2,601 2,703 -------- --------
Total assets $ 19,687 $ 21,052 ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,141 $ 2,007 Accrued expenses 788 1,275 Current portion of long-term debt 4,890 230 -------- --------
Total current liabilities 8,819 3,512
Long-term debt - 4,872 -------- --------
Total liabilities 8,819 8,384 -------- --------
Stockholders' equity:
Common stock and additional paid-in capital 31,109 30,662 Treasury stock (7) (7) Accumulated other comprehensive income (loss) 393 523 Retained earnings (deficit) (20,627) (18,510) -------- --------
Total stockholders' equity 10,868 12,668 -------- --------
Total liabilities & stockholders' equity $ 19,687 $ 21,052 ======== ========
ZOOM TECHNOLOGIES, INC. Consolidated Statements of Operations In thousands, except for per share data (Unaudited)
Three Months Ended Years Ended 12/31/05 12/31/04 12/31/05 12/31/04 -------- -------- -------- --------
Net sales $ 7,282 $ 8,386 $ 25,551 $ 31,412Cost of goods sold 6,048 6,379 20,885 23,346 -------- -------- -------- --------
Gross profit 1,234 2,007 4,666 8,066
Operating expenses: Selling 887 1,288 4,059 4,800 General and administrative 686 822 3,553 3,620 Research and development 589 862 2,699 2,927 -------- -------- -------- -------- Total operating expenses 2,162 2,972 10,311 11,347 -------- -------- -------- --------
Operating profit (loss) (928) (965) (5,645) (3,281)
Other income (expense), net 78 59 3,537 209 -------- -------- -------- --------
Income (loss) before income taxes (850) (906) (2,108) (3,072)
Income tax expense (benefit) 9 - 9 - -------- -------- -------- --------
Net income (loss) $ (859) $ (906) $ (2,117) $ (3,072) ======== ======== ======== ========
Basic earnings (loss) per share:
Earnings (loss) per share $ (0.09) $ (0.10) $ (0.23) $ (0.36)
Diluted earnings (loss) per share:
Earnings (loss) per share $ (0.09) $ (0.10) $ (0.23) $ (0.36) ======== ======== ======== ========
Weighted average number of shares outstanding:
Basic 9,347 8,900 9,206 8,590
Diluted 9,347 8,900 9,206 8,590 ======== ======== ======== ========
Contact:Robert Crist617-423-1072
SOURCE: Zoom Technologies, Inc.
Source: marketwire
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