UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 29, 1998
COMMISSION FILE NUMBER 1-12333
Iomega Corporation
(Exact name of registrant as specified in its charter)
Delaware 86-0385884
(State or other jurisdiction (IRS employer identification number)
of incorporation or organization)
1821 West Iomega Way, Roy, UT 84067 (Address of principal
executive offices)
(801) 778-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No _______
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of March 29, 1998.
Common Stock, par value $.03 1/3 263,253,504
(Title of each class) (Number of shares)
<PAGE>
PART I, Item 1., of the Company's Quarterly Report on Form 10-Q as
originally filed on May 12, 1998 is being amended in its entirety to correct a
typographical error caused by transmission complications. The amendment changes
Additional paid-in capital from $75,814 as originally filed to $275,814. No
other changes are being made by this amendment. The Financial Data Schedule
(Exhibit 27) is correct as originally filed.
<PAGE>
<TABLE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
March 29, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 80,491 $ 159,922
Temporary investments - 36,319
Trade receivables, net 249,270 280,182
Inventories 313,632 246,383
Deferred tax assets 56,939 47,996
Other current assets 13,792 11,982
---------- ---------
Total current assets 714,124 782,784
---------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost 295,361 272,219
Less: Accumulated depreciation and
amortization (107,943) (96,550)
---------- ---------
Net property, plant and equipment 187,418 175,669
---------- ---------
OTHER ASSETS 3,176 3,186
---------- ---------
$ 904,718 $ 961,639
========== ==========
</TABLE>
The accompanying notes to condensed
consolidated financial statements are an integral part
of these balance sheets.
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
March 29, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 219,650 $ 257,281
Accrued payroll, vacation and bonus 16,461 31,728
Deferred revenue 35,235 42,423
Income taxes payable 13,545 22,440
Accrued advertising 37,776 32,628
Other accrued liabilities 54,872 52,613
Current portion of capitalized lease
obligations 5,259 5,505
--------- ---------
Total current liabilities 382,798 444,618
--------- ---------
CAPITALIZED LEASE OBLIGATIONS,
net of current portion 2,884 2,939
--------- ----------
NOTES PAYABLE 30,000 -
--------- ----------
DEFERRED INCOME TAXES 1,702 10,334
--------- ----------
CONVERTIBLE SUBORDINATED NOTES,
6.75%, due 2001 45,683 45,683
--------- ----------
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value;
authorized 4,750,000 shares,
none issued - -
Series C, Junior Participating
Preferred Stock, authorized
250,000 shares, none issued - -
Common Stock, $.03 1/3 par value;
authorized 400,000,000 shares,
issued 264,060,257 and
262,264,830 shares at March 29, 1998
and December 31, 1997, respectively 8,801 8,741
Additional paid-in capital 275,814 273,826
Less: 806,753 and 829,210 Common
Stock treasury shares
at March 29, 1998 and
December 31, 1997, respectively,
at cost (6,070) (6,099)
Deferred compensation (251) (336)
Retained earnings 163,357 181,933
--------- ----------
Total stockholders' equity 441,651 458,065
--------- ----------
$ 904,718 $ 961,639
========= ==========
</TABLE>
The accompanying notes to condensed
consolidated financial statements are an integral part
of these balance sheets.
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
For the Three Months Ended
March 29, March 30,
1998 1997
(Unaudited)
<S> <C> <C>
SALES $ 407,500 $ 361,344
COST OF SALES 305,364 254,065
--------- ---------
Gross margin 102,136 107,279
--------- ---------
OPERATING EXPENSES:
Selling, general and administrative 107,942 54,360
Research and development 23,133 14,717
--------- ---------
Total operating expenses 131,075 69,077
--------- ---------
OPERATING INCOME (LOSS) (28,939) 38,202
Interest and other income (expense), net 437 (2,872)
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (28,502) 35,330
Benefit (provision) for income taxes 9,926 (12,316)
--------- ---------
NET INCOME (LOSS) $ (18,576) $ 23,014
========= =========
NET INCOME (LOSS) PER COMMON SHARE
Basic $ (0.07) $ 0.09
========= =========
Diluted $ (0.07) $ 0.08
========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (Notes 1 and 2) 262,238 257,286
========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - Assuming Dilution (Notes 1 and 2) 262,238 280,668
========= =========
</TABLE>
The accompanying notes to condensed
consolidated financial statements are an integral part
of these statements.
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
For the Three Months Ended
March 29, March 30,
1998 1997
(Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ (18,576) $ 23,014
Non-Cash Revenue and Expense Adjustments:
Depreciation and amortization expense 12,885 7,964
Deferred income tax provision (benefit) (17,575) 257
Tax benefit from dispositions of employee
stock 696 1,056
Other 741 197
Changes in Assets and Liabilities:
Trade receivables, net 30,912 59
Inventories (67,249) 16,594
Other current assets (1,423) (1,592)
Accounts payable (37,631) (16,922)
Accrued liabilities (15,048) (6,934)
Income taxes (8,895) 7,716
---------- ---------
Net cash provided by (used in) operating
activities (121,163) 31,409
---------- ---------
Cash Flows from Investing Activities:
Purchase of property, plant and equipment (24,068) (14,489)
Sale of temporary investments 36,319 -
Net decrease in other assets 10 360
---------- ---------
Net cash provided by (used in)
investing activities 12,261 (14,129)
---------- ----------
Cash Flows from Financing Activities:
Proceeds from sales of Common Stock 1,353 1,168
Proceeds from issuance of notes payable 30,000 86,725
Payments on notes payable and capitalized
lease obligations (1,524) (94,982)
Purchase of Common Stock (358) (1,736)
---------- ---------
Net cash provided by (used in) financing
activities 29,471 (8,825)
---------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents (79,431) 8,455
Cash and Cash Equivalents at Beginning of Period 159,922 108,312
---------- ---------
Cash and Cash Equivalents at End of Period $ 80,491 $ 116,767
========== =========
</TABLE>
The accompanying notes to condensed
consolidated financial statements are an integral part
of these statements.
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd.)
(In thousands)
<TABLE>
For the Three Months Ended
March 29, March 30,
1998 1997
(Unaudited)
<S> <C> <C>
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Property, plant and equipment financed under
capitalized lease obligations $ 1,223 $ 1,321
========== =========
Issuance of Common Stock in lieu of
compensation $ 360 $ -
========== =========
</TABLE>
The accompanying notes to condensed
consolidated financial statements are an integral part
of these statements.
<PAGE>
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
In the opinion of the Company's management, the accompanying condensed
consolidated financial statements reflect all adjustments (consisting
only of normal recurring adjustments) which are necessary to present
fairly the financial position of the Company as of March 29, 1998 and
December 31, 1997, the results of operations for the three-month
periods ended March 29, 1998 and March 30, 1997, and cash flows for the
three-month periods ended March 29, 1998 and March 30, 1997.
The results of operations for the three-month period ended March 29,
1998 are not necessarily indicative of the results to be expected for
the entire year or for any future period.
These unaudited condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and
notes included in or incorporated into the Company's latest Annual
Report on Form 10-K.
Pervasiveness of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Principles of Consolidation - The condensed consolidated financial
statements include the accounts of Iomega Corporation and its wholly
owned subsidiaries after elimination of all material intercompany
accounts and transactions.
Revenue Recognition - The Company's customers include original
equipment manufacturers, end users, retailers, distributors and value
added manufacturers. Revenue, less reserves for returns, is generally
recognized upon shipment to the customer.
In addition to reserves for returns, the Company defers recognition of
revenue on estimated excess inventory in the distribution and retail
channels. For this purpose, excess inventory is the amount of inventory
which exceeds the channels' 30 day requirements as estimated by
management. The gross margin associated with deferral of revenue for
returns and estimated excess channel inventory totaled $35.2 million
and $42.4 million at March 29, 1998 and December 31, 1997,
respectively, and is included in deferred revenue in the accompanying
condensed consolidated balance sheets.
<PAGE>
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Price Protection and Volume Rebates - The Company has agreements with
certain of its customers which, in the event of a price decrease, allow
those customers (subject to certain limitations) credit equal to the
difference between the price originally paid and the reduced price on
units in the customers' inventories at the date of the price decrease.
When a price decrease is anticipated, the Company establishes reserves
against gross accounts receivable for amounts estimated to be
reimbursed to the qualifying customers.
In addition, the Company records reserves at the time of shipment for
estimated volume rebates. These reserves for volume rebates and price
protection credits totaled $32.5 million and $28.5 million at March 29,
1998 and December 31, 1997, respectively, and are netted against
accounts receivable in the accompanying condensed consolidated balance
sheets.
Foreign Currency Translation - For purposes of consolidating foreign
operations, the Company has determined the functional currency for its
foreign operations to be the U.S. dollar. Therefore, translation gains
and losses are included in the determination of income.
Cash Equivalents and Temporary Investments - For purposes of the
statements of cash flows, the Company considers all highly liquid debt
instruments purchased with maturities of three or fewer months to be
cash equivalents. Cash equivalents primarily consist of investments in
money market mutual funds, commercial paper, option rate preferred
stock and taxable municipal bonds and notes and are recorded at cost,
which approximates market. Instruments with maturities in excess of
three months are classified as temporary investments. The Company has
classified its entire portfolio of temporary investments at December
31, 1997, as held-to-maturity. These temporary investments consist
primarily of commercial paper and municipal bonds. At December 31,
1997, all temporary investments had maturities of less than six months.
There were no temporary investments at March 29, 1998.
Inventories - Inventories include direct materials, direct labor and
manufacturing overhead costs and are recorded at the lower of cost
(first-in, first-out) or market and consist of the following (in
thousands):
<TABLE>
March 29, December 31,
<S> <C> <C>
1998 1997
Raw materials $ 186,170 $ 130,049
Work-in-process 20,194 18,714
Finished goods 107,268 97,620
----------- ----------
$ 313,632 $ 246,383
=========== ==========
</TABLE>
<PAGE>
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Reclassifications - Certain reclassifications were made to the prior
periods' condensed consolidated financial statements to conform with
the current period presentation.
Net Income (Loss) Per Common Share - Basic net income (loss) per common
share (Basic EPS) excludes dilution and is computed by dividing net
income (loss) by the weighted average number of common shares
outstanding during the period. Diluted net income per common share
(Diluted EPS) reflects the potential dilution that could occur if stock
options or other contracts to issue common stock were exercised or
converted into common stock. Diluted EPS for the quarter ended March
30, 1997, was determined under the assumption that the convertible
subordinated notes were converted on January 1, 1997. The computation
of Diluted EPS does not assume exercise or conversion of securities
that would have an antidilutive effect on net income per common share.
In periods where losses are recorded, common stock equivalents would
decrease the loss per share and are therefore not added to the weighted
average shares outstanding. Net income (loss) per common share amounts
and share data have been restated for all periods presented to reflect
Basic and Diluted EPS and the stock split described in Note 2.
Following is a reconciliation of the numerator and denominator of Basic
EPS to the numerator and denominator of Diluted EPS for all periods
presented (in thousands, except per share data):
<TABLE>
Net Income (Loss) Shares Per-Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
March 29, 1998
Basic EPS $ (18,576) 262,238 $ (0.07)
Effect of options - -
Effect of convertible
subordinated notes - -
---------- -------
Diluted EPS $ (18,576) 262,238 $ (0.07)
========== =======
March 30, 1997
Basic EPS $ 23,014 257,286 $ 0.09
Effect of options - 14,120
Effect of convertible
subordinated notes 501 9,262
---------- -------
Diluted EPS $ 23,515 280,668 $ 0.08
========== =======
</TABLE>
Recent Accounting Pronouncements - In June 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income" (SFAS 130) and No.
131 "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131). SFAS 130 establishes standards for the
reporting and display of comprehensive income and its components and
SFAS 131 establishes new standards for public companies to report
information about their operating segments, products and services,
geographic areas and major customers. These statements are effective
for financial statements issued for fiscal years beginning after
December 15, 1997.
The Company adopted SFAS 130 in the quarter ended March 29, 1998, and
plans to adopt SFAS 131 in its December 31, 1998 financial statements.
<PAGE>
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) STOCK SPLIT
In November 1997, the Board of Directors declared a two-for-one Common
Stock split which was effected in the form of a 100% Common Stock
dividend paid on December 22, 1997 to stockholders of record at the
close of business on December 1, 1997.
This stock dividend was accounted for as a stock split and has been
retroactively reflected in the accompanying condensed consolidated
financial statements. In connection with this stock split, proportional
adjustments were made to outstanding stock options and other
outstanding obligations of the Company to issue shares of Common Stock.
(3) INCOME TAXES
Income tax benefit for the three months ended March 29, 1998 has been
provided for at an effective rate of 35%. This tax rate is based on the
Company's projected mix of domestic and foreign pre-tax income for
1998.
U.S. taxes have not been provided for unremitted foreign earnings
which are considered to be permanently reinvested in non-U.S.
operations.
Cash paid for income taxes was $16.5 million for the first three
months of 1998 and $3.3 million for the corresponding period in 1997.
(4) DEBT
Notes Payable - On March 11, 1997, the Company entered into a $200
million Senior Secured Credit Facility ("Credit Facility") with Morgan
Guaranty Trust Company of New York, Citibank, N.A. and a syndicate of
other lenders. During January 1998, the Company amended the Credit
Facility. The amended Credit Facility is a three-year unsecured
revolving line of credit from the amendment date. Borrowings under the
Credit Facility were limited to $200 million for the first quarter of
1998 and thereafter are limited to the lesser of 70% of the prior
quarter's eligible accounts receivable or $200 million. Under the
Credit Facility, the Company may borrow at a base rate, which is the
higher of prime or federal funds plus a margin of 0.0% to 0.38%,
depending on the Company's debt-to-equity ratio, or at LIBOR plus a
margin of 1.0% to 1.75%, depending on the Company's debt-to-equity
ratio. Total availability under the Credit Facility at March 29, 1998,
was $200 million, of which $30 million was outstanding. Among other
restrictions, the Credit Facility treats a change of control (as
defined) as an event of default and requires the maintenance of minimum
levels of consolidated tangible net worth and earnings. Prior to March
29, 1998 the Company requested, and on March 29, 1998 it received, a
one-quarter waiver of a covenant within the Credit Facility requiring
cash conversion days to be 80 days or less. Cash conversion days in the
first quarter of 1998 were 83 days. The Company was in compliance with
all applicable covenants as of March 29, 1998.
<PAGE>
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Capital Leases - The Company has entered into various agreements to
obtain capital lease financing for the purchase of certain
manufacturing equipment, software, office furniture and other
equipment. The leases have terms ranging from 36- to 60-months and
mature at various dates from July 1998 to January 2001. Principal and
interest payments under the various agreements are payable monthly or
quarterly. Interest rates are fixed and range from 7.1% to 10.2%. The
leases are secured by the underlying leased equipment, software and
furniture.
(5) OTHER MATTERS
Significant Customers - During the fiscal quarter ended March 29, 1998,
sales to Ingram Micro, Inc. accounted for approximately 14.3% of
consolidated sales. During the fiscal quarter ended March 30, 1997,
sales to Ingram Micro, Inc. accounted for 13.2% of consolidated sales.
No other single customer accounted for more than 10% of the Company's
sales for these periods.
Forward Exchange Contracts - The Company has commitments to sell and
purchase foreign currencies relating to forward exchange contracts in
order to hedge against future currency fluctuations.
At March 29, 1998 outstanding forward exchange sales (purchase)
contracts, which all mature in June 1998, were as follows:
<TABLE>
Contracted
Currency Amount Forward Rate
<S> <C> <C>
Australian Dollar 100,000 1.49
British Pound (1,600,000) .60
Dutch Guilder (7,300,000) 2.05
French Franc (1,000,000) 6.10
German Mark (2,100,000) 1.82
Irish Punt (80,000) .73
Japanese Yen 550,000,000 127.25
Malaysian Ringgit (14,400,000) 3.61
Singapore Dollar (2,450,000) 1.60
Swiss Franc (2,500,000) 1.48
</TABLE>
<PAGE>
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The contracts are revalued at the month-end spot rate. Gains and losses
on foreign currency contracts intended to be used to hedge operating
requirements are reported currently in income. Gains and losses on
foreign currency contracts intended to meet firm commitments are
deferred and are recognized as part of the cost of the underlying
transaction being hedged. At March 29, 1998, all of the Company's
foreign currency contracts were being used to hedge operating
requirements. The Company's theoretical risk in these transactions is
the cost of replacing, at current market rates, these contracts in the
event of default by the counterparty.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IOMEGA CORPORATION
(Registrant)
/s/ Leonard C. Purkis
----------------------
Dated: May 19, 1998 Leonard C. Purkis
Senior Vice President, Finance
and Chief Financial Officer
