Financial: QMS Releases Results of the Transitional Quarter Ended January 1, 1999 - Company Financial Information

Edge: Work-Group Computing Report, Feb 1, 1999

QMS, Inc. (NYSE:AQM) announced revenues of $39.3 million for the three months ending January 1, 1999, a 38% increase over the three months ending January 2, 1998. Operating income for the quarter ending January 1, 1999, was $235,000, up from $229,000 in the same quarter for the prior year. Net income for the period was $112,000 or $0.01 per share compared to $401,000 or $0.04 per share on revenues of $28.6 million for the same quarter last year.

Fiscal 1998 earnings included a one-time gain of $193,000 from the sale of physical assets. Gross margins increased $0.9 million but decreased as a percentage of net sales from 31.7% to 25.5% for the three months ending January 2, 1998, and January 1, 1999, respectively. Operating expenses at $9.8 million decreased as a percentage of net sales from 30.9% to 24.9%. Commenting on the comparative results to prior year, Tony Wallace, chief financial officer, stated, "The current quarter included a full quarter's consolidated results from the newly reactivated Japan subsidiary. Japan revenues generated 73% of the reported 38% year-over-year sales increase, had a nominal effect on gross margin and accounted for essentially all of the increase in operating expenses from the prior quarter." "Several factors contributed to our lower gross margin percentage," continued Mr. Wallace. "The transition in our sales strategy from a direct to reseller-based model was chief among them. By the end of the quarter, over three-quarters of our business had been changed over to the new model. Additionally, restarting Japan operations depressed margin percentage as distributor commissions have been replaced with more typical sales margins. Service revenue and margins declined due to lower contract penetration and deferred new bookings. To offset our lower margins, we are improving our efficiencies and lowering expenses as a percent of net sales. We'll also continue to drive down our product costs so that we can remain positioned as an aggressive contender in the market." Commenting on the quarter, Edward E. Lucente, President and Chief Executive Officer stated, "We are very encouraged by our net sales over the last year. Since taking the helm of the company last January, revenue growth has been one of my primary goals. While I am obviously disappointed with the overall earnings results for the quarter, I am pleased with the progress the company made in the last year. The quarter was particularly difficult since it was one of the most intensely competitive periods of the last few years. In spite of these external pressures, we recorded a profit, introduced an exciting 13" x 19" color laser printer, extended our monochrome product series to include the QMS 3260, a new departmental printer, and reopened our subsidiary in Japan. As we go into 1999, I am determined to grow our net income as we continue our upswing in sales."