Iomega Announces Loss Within Previously Announced Range
Zip Drive Shipments up 35 Percent
Zip Disk Shipments up 44 Percent Amended $150 Million Credit Facility in Place
ROY, Utah--(BUSINESS WIRE)--July 16, 1998--Iomega Corporation (NYSE:IOM - news) today reported second quarter revenue of $394 million, a
decrease of two percent from its second quarter 1997 revenue of $400 million.
The Company's net loss, before special charges, for the second quarter was $33.8 million, or $(0.13) per diluted share, and was within the range
pre-announced by Iomega on June 18, 1998. Also in the second quarter, Iomega recorded special pre-tax charges of $9.4 million, (or $(0.02) per diluted
share after tax), related to its cost reduction efforts. The total after tax loss for the second quarter, including these charges, was $39.9 million, or $(0.15)
per diluted share. In the second quarter of 1997, Iomega earned $26.2 million or $0.09 per diluted share.
For the first six months of 1998, Iomega's revenue totaled $801 million versus $762 million for the first six months of 1997, an increase of five percent.
Iomega's net loss for the first six months of 1998, including the second quarter special charges, totaled $58.5 million, or $(0.22) per diluted share, versus
net income of $49.2 million, or $0.18 per diluted share, for the same period in 1997.
''It was a tough retail quarter, which hit our Jaz(R) business particularly hard,'' said James E. Sierk, president and chief executive officer, Iomega
Corporation. ''Our Zip(R) business, however, had the best quarter in its history in terms of disk sales. We also passed a major milestone at the end of
June by shipping our 15 millionth Zip drive. Approximately half of our Zip drive business is now OEM, which has caused us to take a hard look at our cost
structure. We made some tough decisions this quarter. We reduced staff and made significant spending cuts with the goal of returning to profitability in the
fourth quarter.''
By product category, Iomega's Zip sales were $284 million in the second quarter, an increase of 10 percent over second quarter 1997. Zip drive
shipments increased 35 percent and Zip disk unit shipments increased 44 percent over second quarter 1997. Jaz revenue decreased 23 percent to $87
million from $113 million in the second quarter of 1997. Iomega's Ditto(TM) revenue decreased 28 percent to $21 million from second quarter of 1997.
Geographically, Iomega's Americas business was up four percent from second quarter 1997 to $258 million. Revenue was lower than anticipated in the
U.S. market due to slower than expected Jaz sales. Compared to second quarter 1997, Iomega's European sales were down 13 percent to $93 million
and sales in Iomega's Asia/Pacific region were down four percent to $43 million.
Gross margin decreased to $94 million, or 24 percent of sales for the second quarter of 1998, from $117 million, or 29 percent of sales for the second
quarter of 1997. The decline in gross margin, as a percentage of sales in the second quarter, was primarily attributable to a shift toward a higher mix of
OEM Zip drive shipments, market pressure on Iomega's Jaz business and pricing actions across product lines. Iomega's Zip business gross margins
increased over the first quarter due to strong disk sales, which partially offset the decline in Jaz and Ditto gross margins in the second quarter.
Selling, general & administrative (''SG&A'') expenses increased to $115 million, excluding special charges, or 29 percent of sales, for the second quarter
of 1998, as compared to $61 million, or 15 percent of sales, in the second quarter 1997. The increase in SG&A expense was primarily the result of a
substantial increase in marketing and sales expenditures, and increased spending on customer satisfaction and information systems. Research and
development expenses were approximately $30 million or eight percent of sales compared to $17 million or four percent in the same quarter last year.
Iomega recently initiated a company-wide reorganization that it expects will result in total cost savings of over $50 million in the second half of the year.
Cash and temporary investments as of June 28, 1998 were $68 million, which compares to $80 million as of March 29, 1998. Cash flow was negative
$41 million, which was significantly better than the $60 to $70 million anticipated by the Company in its June 18, 1998 pre-announcement, due to strong
collection of accounts receivable. Reducing accounts payable by approximately $96 million during the quarter was the primary reason for Iomega's $41
million net cash outflow. The Company expects to generate positive cash flow for the second half of the year before Nomai acquisition costs, but still
anticipates being cash flow negative for the year. Earlier this month, Iomega acquired a majority interest in Nomai S.A., a French based manufacturer of
removable storage systems. This acquisition was financed by senior subordinated borrowings from Idanta Partners and other entities affiliated with David
J. Dunn, chairman of the board, Iomega Corporation.
''I am very pleased to announce today that we have in place an amended $150 million senior secured credit facility with a syndicate of 12 banks led by
J.P. Morgan and Citicorp,'' continued Mr. Sierk. ''We feel this bank line, combined with the early progress we have made in improved asset management,
will provide the liquidity we need to capitalize on our market opportunities.''
Iomega Corporation manufactures personal read/write storage solutions that help people manage their stuff -- anywhere. Iomega's products provide
consumers with what they want, when they want it, at a reasonable price. The Company's storage solutions, designed for all types of computer users,
include Zip drives and genuine Zip 100 disks; Jaz one- and two-gigabyte drives and disks; and Ditto tape backup drives and tape cartridges. Whether
used in homes, business, government or education, or by creative professionals, all Iomega storage solutions ensure high levels of quality and reliability
when using authorized Iomega media products. Iomega products are available through computer retail stores, resellers, major distributors and OEMs. The
Company can be reached at 1-800-MY-STUFF (800-697-8833), or on the web at iomega.com. Additional Iomega press releases can be
accessed through the toll-free fax-back line: (888-88-IOMEGA).
Special Note: The statements in this release related to the expected return to profitability in the fourth quarter of 1998, anticipated cost savings in the
second half of 1998, future cash flow and liquidity are forward-looking statements. There are a number of important factors that could cause actual results
to differ materially from those suggested or indicated by such forward-looking statements. These include, among others, market acceptance of and
demand for the Company's storage solutions, the impact of competition from other suppliers of data storage products, the success of the Company's cost
reduction programs and its success in realizing cost savings from its Six Sigma quality initiatives, the impact of the Company's acquisition of a controlling
interest in Nomai S.A., the ability of the Company to reduce inventory levels, its ability to generate positive cash flow, its ability to maintain stringent quality
assurance standards and enhanced customer services, the timely introduction and marketing of the Company's new products, manufacturing and inventory
issues, production costs, intellectual property rights, general economic conditions and the other factors described in Iomega's Annual Report to
Stockholders for 1997 on Form 10-K, filed March 31, 1998 and its most recent quarterly reports filed with the SEC.
Note to Editors: Iomega, Zip, Jaz, and the stylized ''i'' logo are registered trademarks of, and Ditto is a trademark of, Iomega Corporation. All other
products and brand names are the property of their respective owners. For maximum reliability, use only genuine Zip 100 disks featuring the genuine Zip
100 symbol in your Zip drive.
Note: Financials to follow |
