A 3rd quarter earnings estimate
I'm posting the following to show what I perceive is the impact of the North American $50 rebate on Iomega Zip drives. The effect of the rebate will be felt in reported EPS numbers for 3Q96, 4Q96, and 1Q97. Being able to analyze the underlying fundamental trend of Zip drive sales will mean separating the rebate effect. I think a healthy discussion of how the rebate effects the income statement is very important and any input would be appreciated. So without further ado:
My estimate for Q396. Quantities are in thousands. All rebate eligible sales are reserved or paid. For Zip drives: rebate on U.S. sales only, European sales decline 10%, U.S. sales increase ~75%, Asian sales unknown. For Zip disks: 10-pack is factored as a single item, other disks are broken to each disk sales (e.g. 6 pack treated as 6 single disks sold at average cost). For Jaz drives: all co-brands included under Insider sales. All Jaz disks taken as single disk sales at an average selling price. I hope this displays correctly on AOL, otherwise import somewhere with a fixed pitch font. I could email the Excel spreadsheet if anyone wants it.
QTR3-1996
Zip Drives:
OEM 200 @ $75.00 = $15,000
Retail 1300 @ $133.00 = $172,900
Rebate 935 @ ($50.00) = ($55,250)
Total Zip drives = $132,650
Zip Disks:
10 - pack 150 @ $108.00 = $16,200
Co-Brands 3150 @ $9.83 = $30,958
Iomega 2775 @ $12.24 = $33,966
Rebate 150 @ ($20.00) = ($3,000)
Total Zip disks = $78,124
Jaz Drives:
Insider 48 @ $259.35 = $12,449
Portable 72 @ $324.35 = $23,353
Total Jaz drives = $35,802
Jaz Disks:
In 5 pack 240 @ $69.30 = $16,632
Single 240 @ $83.85 = $20,124
Total Jaz disks = $36,756
Total Ditto = $27,000
Total Other = $6,000
Total All Revenues - Rebates = $316,332
Cost of Sales = $230,923
Gross Margin = $85,410
SG&A = $53,776
R&D = $12,653
Operating Income = $18,980
Interest Income = $1,333
Taxes = $7,922
Net Income = $11,058
Weighted Shares = 132,000
** EPS = $0.08 **
PKeeler
Patrick Keeler
P.S. If Iomega fully accounts for rebates for every drive/10-pack sold this quarter, then reductions in this reserve should occur in 4Q96 and 1Q97 as some people simply procrastinate. If 15% of drive buyers fail to submit the rebate that would add $8.3 million ($0.06/share) of net income to 4Q96 or 1Q97. |
