Iomega Announces Second Quarter Loss Within Previously Announced Range; Company Continues Drive Toward Sustainable Profitability - 2nd qtr 1999 - Company Financial Information

Edge: Work-Group Computing Report, July 19, 1999

Iomega Corporation (NYSE:IOM) Thursday reported a second quarter net loss, before a restructuring charge, of $19.8 million or $(0.07) per diluted share, which was within the range announced by Iomega on June 18, 1999.

Also in the second quarter, Iomega recorded a pre-tax restructuring charge of $41.9 million or $(0.10) per diluted share after tax, relating to the exit of facilities, headcount reductions, and other cost reduction activities. The total after tax loss for the second quarter, including this restructuring charge, was $47.1 million or $(0.17) per diluted share. For the second quarter of 1998, Iomega recorded a loss of $39.9 million or $(0.15) per diluted share. The second quarter 1998 loss included a special pre-tax charge of $9.4 million or $(0.02) per diluted share. Revenue for the second quarter of 1999 was $349 million, which compares to second quarter 1998 revenue of $394 million.

"We have taken decisive actions to position Iomega for sustainable profitability," said Jodie Glore, president and chief executive officer, Iomega Corporation. "We have implemented an organizational structure that will make us more focused and responsive. We anticipate that the steps we have taken, when fully implemented over the remainder of the year, will result in annual cost savings of approximately $40 million beginning in the year 2000. As we eliminate excessive overhead, we will be much better positioned to capitalize on the strength of our existing products and on the growth opportunities of our new products, including our Clik! PC Card Drive, which we shipped late in the second quarter."

Second quarter 1999 gross margin of $76 million represented 22 percent of sales, compared to second quarter 1998 gross margin of $94 million or 24 percent of sales. Operating expenses, excluding the restructuring charge, were $106 million or 30 percent of sales for the second quarter of 1999, compared to $145 million (excluding the special pre-tax charge of $9.4 million), or 37 percent of sales in the second quarter of 1998.

"As we focus on operational excellence, we have continued to improve our balance sheet," continued Mr. Glore. "Second quarter inventory of $138 million is the lowest it has been in 12 quarters and we generated nearly $33 million in positive cash flow in the quarter. We are very comfortable with our liquidity. Cash and cash equivalents at the end of the second quarter were $89.3 million. During the quarter we also repaid $40 million of outstanding short-term debt with internally generated funds."

By product category, Iomega shipped 2.5 million Zip drives in the second quarter of 1999, an increase of 27 percent over second quarter 1998, and shipped 17.2 million Zip disks, an increase of 24 percent over second quarter 1998. Second quarter Zip revenue of $274 million was down four percent over second quarter 1998. Iomega shipped 122 thousand Jaz drives and 489 thousand Jaz disks in the second quarter, down 24 percent and 23 percent, respectively, from the second quarter of 1998. Second quarter 1999 Jaz revenue decreased 25 percent to $65 million from $87 million in the second quarter of 1998. Second quarter revenue from Iomega's new Clik! product platform was $1 million resulting from the shipment of 4 thousand Clik! drives and 22 thousand Clik! disks.

For the first six months of 1999, Iomega's revenue totaled $735 million versus $801 million for the first six months of 1998. Iomega's net loss for the first six months of 1999 (including the second quarter restructuring charge), totaled $46.5 million or ($0.17) per diluted share, versus a net loss (including the second quarter 1998 special pre-tax charge), of $58.5 million or $(0.22) per diluted share for the same period in 1998.

For the second half of the year, the Company anticipates an after-tax return on sales in the mid-single digits. However, financial results in the second half of the year will be heavily dependent on the success of new product offerings, on the results of the seasonally strong fourth quarter, and on the Company's ability to resolve current Zip drive component constraints.

Iomega Corporation (NYSE:IOM) manufactures and markets the award-winning Zip, Jaz and Clik! drives and disks that help people to organize, manage, create, exchange and share their important information. Used in homes, businesses, government, education and by creative professionals everywhere, Iomega storage solutions are the enabling technologies preferred by millions. The Company can be reached at 1-800-MY-STUFF (800-697-8833), or on the Web at http://www.iomega.com.

IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
For the Three Months Ended
                                               June 27,    June 28,
                                                 1999        1998

SALES                                         $ 348,781   $ 393,831
COST OF SALES                                   273,020   299,607
Gross margin                                     75,761      94,224

OPERATING EXPENSES:
Selling, general and administrative              82,828  124,399(a)
Research and development                         23,085      30,303
Restructuring charge                             41,909           0
Total operating expenses                        147,822     154,702
OPERATING LOSS                                  (72,061)   (60,478)
Interest and other income and expense, net         (328)      (918)

LOSS BEFORE INCOME TAXES                        (72,389)   (61,396)

BENEFIT FOR INCOME TAXES                         25,336      21,486

NET LOSS                                      ($ 47,053) ($ 39,910)

BASIC LOSS PER SHARE                          ($   0.17) ($   0.15)
DILUTED LOSS PER SHARE                        ($   0.17) ($   0.15)
COMMON SHARES OUTSTANDING                       269,115     265,464
COMMON SHARES ASSUMING DILUTION                 269,115     265,464


For the Six Months Ended
                                               June 27,    June 28,
                                                 1999        1998

SALES                                         $ 734,993   $ 801,331
COST OF SALES                                   565,496     604,971
Gross margin                                    169,497     196,360

OPERATING EXPENSES:
Selling, general and administrative             152,769  232,341(a)
Research and development                         43,798      53,436
Restructuring charge                             41,909           0
Total operating expenses                        238,476    285,777
OPERATING LOSS                                  (68,979)   (89,417)
Interest and other income and expense, net       (2,533)      (481)

LOSS BEFORE INCOME TAXES                        (71,512)   (89,898)

BENEFIT FOR INCOME TAXES                         25,028      31,412

NET LOSS                                      ($ 46,484) ($ 58,486)

BASIC LOSS PER SHARE                          ($   0.17) ($   0.22)
DILUTED LOSS PER SHARE                        ($   0.17) ($   0.22)
COMMON SHARES OUTSTANDING                       268,753     263,878
COMMON SHARES ASSUMING DILUTION                 268,753     263,878

(a)SG&A includes a $9.4 million second quarter special charge
relating to the Company's staff reduction and other cost-cutting
measures


IOMEGA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
                                               June 27,    June 28,
                                                 1999        1998
ASSETS:
Cash and cash equivalents                      $ 89,281    $ 68,142
Trade receivables (net)                         185,999     143,299
Inventories                                     138,400   280,411
Other current assets                             88,923      92,669
Total current assets                            502,603     584,521

Fixed assets (net)                              173,559     193,715
Intangibles and other assets                     53,781       7,031

Total Assets                                   $729,943    $785,267

LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable                                  $    383    $      0
Current lease obligations                         4,014       5,059
Accounts payable                                124,097     123,176
Other current liabilities                       175,656     145,469
Total current liabilities                       304,150   273,704

Long-term liabilities                             5,089      61,343
Convertible notes                                45,505      45,683
Stockholders' equity                            375,199     404,537

Total Liabilities & Stockholders' equity       $729,943    $785,267