Iomega Corp.'s third-quarter financial results lived down to its expectations Thursday, revealing a net loss of more than $78 million for the three months ending Sept. 26.
However, officials of the Roy-based computer data storage company said they are optimistic Iomega's restructuring efforts will pay off in the long run.The company, which warned of the expected loss earlier this month, recorded $20.5 million in restructuring charges during the third quarter, with an expected $7.5 million more to be taken by the end of the year. Iomega chief financial officer Phil Husby said the bulk of those charges had to do with the company's decision to move away from its battery-operated version of the Clik! drive designed for use with digital cameras.
The remainder of the charges were taken to streamline the company's leasehold facilities in Colorado and Utah and consolidate worldwide disk manufacturing by ending production of Clik! products in France.
In addition to restructuring charges, Iomega also reported a $51.3 million increase in its valuation reserve for deferred tax assets and $12.7 million in other charges.
Third-quarter revenue totaled $356.6 million, down 9 percent from the third quarter of 1998. The company attributed the decline to lower revenue from its Jaz disks and drives and from its Ditto tape backup products. In March, Iomega announced it would sell the Ditto products to Colorado-based Tecmar for $3 million but reserved the right to continue to sell its inventory of Ditto products into early 2000.
Despite its discouraging third-quarter results, Iomega treasurer Tracy Welch said the company is optimistic.
"We do feel around here that there are some real reasons to be optimistic and that the stage is set to achieve profitability in the fourth quarter and next year," Welch said.
"Notwithstanding we took a huge loss, if you kind of exclude some of the larger charges -- which are one-timers -- it suggests we achieved a level of profitability. It suggests there were improvements in the last quarter and over the same quarter a year ago."
The company reported about $7 million in pre-tax income, and cash balances as of Sept. 26 were $132.8 million, compared with $89.3 million reported in June.
"We have a very strong balance sheet," Husby said. "We believe we are a very liquid company going forward."
Profitability in the fourth quarter will depend on a number of factors, Husby said, including recurrence of typically strong sales in that time period and the company's ability to address ongoing Zip drive component constraints.
"There is an issue there for us," Welch said, referring to problems the company has had obtaining components for its drives. "But we are managing it aggressively. . . . Our ability to produce did not deteriorate -- we had the same problem last quarter. There were some orders we were unable to fill. It was not much different this quarter than last, and next quarter will likely be similar to this quarter. But we expect it will be better. We have the incentive to manage this problem effectively."