A QUESTION CONCERNING A STATEMENT IN THE CC:
What is this all about?
Len Purkis, Iomega CFO: "...Our capital expenditures in fourth quarter 97 totaled $34 million, bringing total year capital expenditures to $89 million. We entered 1998 with capacity for about 20 million Zip drives and about 3 million Jaz drives, and our 1998 capital expenditures could be double that of 1997, depending on the speed of growth in 1998. To assure financing of these improvements, we have commitments for a new three year $200 million line of credit underwritten by J.P. Morgan and Citibank, which we expect to have signed in the next week. This new line of credit is now unsecured and has a lower interest rate and fees...."
CC Question Relating to this:
Stan Corker, Emerald Research: "Good afternoon. You're putting a lot of effort into expanding the market this year. Assuming some success there, can you comment on what capacity will be in place? Can you maybe say what kind of Zip production capacity you have now and where it would be towards the end of the year?
Len Purkis: [???], Stan, that they have capacity right now going into 98 for about 20 million Zip drives and about 3 million Jaz drives. As I said also, we spent about $89, $90 million on capital expenditures in 1997 and 1998 capital expenditures could be double that, depending on the speed of our growth in 1998, so I think from that you can see that we're anticipating putting into place capacity to fund future growth.
Stan Corker: Kim, could you comment on where you see the licensees in ramping up their production?
Kim Edwards: Yeah, they are just starting now and ramping at what I would consider low rates. They still expect to be somewhere by second quarter, in the area of a couple hundred thousand drives a month type of levels, and then they're still planning on--if the volume's there--to be somewhere around 500,000 drives a month level by year end. The only other thing I'd suggest, Stan, is at some point you may want to talk with them directly. I don't know if they're giving us any spin on that, because they are a licensee, but those are the kinds of numbers we're hearing from them."
My questions: If Iomega can produce 20 million Zip drives next year and licensees could produce between 2 and 4 million, what is this possible $200 million in capital expenditures for? |
