10-K Report
I just poured through Iomega's 10-K, and the company itself raises
many red flags that Iomaniacs scoff at or discount as "Bear FUD."
This paragraph addresses the Nomai situation:
It is possible that other sources of supply for disks used in Zip
or Jaz drives will emerge, either as a result of Nomai or another
party succeeding in producing disks that are compatible with Zip
and/or Jaz drives without infringing the Company's proprietary rights,
or as a result of licenses granted by the Company to other
parties.
Iomega is warning that if Nomai triumphs in court. it opens the
floodgates to other Zip disc makers. In addition, how many here knew
that Nomai was also planning on making Jaz disc knockoffs?
Iomega Corporation v. Nomai S.A. filed in the Paris District Court
on November 12, 1997, (with respect to Nomai's so-called "DUO"
product in development that purports to be compatible with
Iomega Jaz drives);
DUO from Nomai will add insult to injury. This next couple of
paragraphs is just rehash of the usual supply line woes and warnings
about future results based on competition, reliance on Fuji for its
sole supply of Zip media, etc.
Many components incorporated in, or used in, the manufacture
of the Company's products are currently available only from
single or sole source suppliers. In particular, media used in Zip
disks is obtained exclusively from Fuji Photo Film and certain
integrated circuits used in Zip drives are obtained exclusively from
Symbios Logic. The Company has experienced difficulty in the past,
and may experience difficulty in the future, in obtaining a
sufficient supply of many key components on a timely basis. The
Company continues to develop relationships with qualified
manufacturers with the goal of securing high-volume manufacturing
capabilities and controlling the cost of current and future models
of the Company's products; however, there can be no assurance that the
Company will be able to obtain a sufficient supply of components on a
timely basis or realize any future cost savings. For example,
sales were adversely affected during the second and third
quarters of 1997 due to a shortage of certain integrated
circuits for Zip drives and supplier quality problems, and were
adversely affected in the fourth quarter due to a shortage of
components
for Notebook Zip drives which became commercially available during
November 1997. Sales may be adversely affected for these or
similar reasons in the future.
The Company purchases a portion of its single, sole and limited
source components pursuant to purchase orders without guaranteed
supply arrangements. The inability to obtain sufficient components
and equipment, or to obtain or develop alternative sources of
supply at competitive prices and quality, or to avoid manufacturing
delays could prevent the Company from producing sufficient quantities
of its products to satisfy market demand (or, in the case of a
component purchased exclusively from one supplier, the Company
could be prevented from producing any quantity of the affected
product(s) until such component becomes available from an
alternative source), delay product shipments, increase the
Company's material or manufacturing costs or cause an imbalance in
the inventory levels of certain components. Moreover, difficulties
in obtaining sufficient components may cause the Company to modify the
design of its products to use a more readily available
component, and such design modifications may result in product
performance problems. Any or all of these problems could in turn
result in the loss of customers, provide an opportunity for
competing products to achieve market acceptance and otherwise
adversely affect the Company's business and financial results.
This next table seems very fishy. Any CPA's wanna explain the
magically much higher bad numbers for the most recent accounting
period?
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Additions
Balance Charged to Balance
ALLOWANCE FOR DOUBTFUL at begin costs and at end
ACCOUNTS: of period expenses deductions of period
Year end December 31, 1997 $ 8,992 $ 3,598 $ (1,324)* $11,266
Year end December 31, 1996 $ 1,861 $ 9,022 $ (1,891)* $8,992
Year end December 31, 1995 $ 1,627 $ 799 $ (565)* $1,861
PRICE PROTECTION AND
VOLUME REBATES:
Year end December 31, 1997 $17,041 $44,956 $(33,498)** $28,499
Year end December 31, 1996 $ 1,633 $24,480 $ (9,072)** $17,041
Year end December 31, 1995 $ 169 $ 7,103 $ (5,639)** $1,633
Looks pretty fishy to me. Let's see if Herb Greenberg picks this up. |
