Iomega Reports Fourth Quarter Financial Results

SAN DIEGO, Feb. 1  /PRNewswire-FirstCall/ -- Iomega Corporation (NYSE:IOM) today reported net revenue of $76.2 million and a net profit of $4.9 million, or $0.09 per diluted share, for the quarter ended December 31, 2006.  In comparison, fourth quarter 2005 net revenue was $70.0 million with a net profit of $1.9 million, or $0.04 per diluted share, and third quarter 2006 net revenue was $53.6 million with a net profit of $0.9 million, or $0.02 per diluted share.  Fourth quarter net revenue increased $6.2 million, or 9%, from the same quarter last year primarily due to increases in Consumer Storage Solutions products of $11.9 million, partially offset by the expected decrease in Zip(R) revenue of $6.8 million.  Additionally, fourth quarter 2006 net revenue increased $22.6 million, or 42%, from third quarter 2006 revenue primarily due to an increase in Consumer Storage Solutions sales as a result of both widespread market success of Iomega's new external HDD products and normal seasonality.

Gross margin for fourth quarter 2006 was $15.4 million, or 20.2%, as compared to fourth quarter 2005 gross margin of $14.8 million, or 21.2%, and third quarter 2006 gross margin of $12.2 million, or 22.8%.  The decrease of 100 basis points from fourth quarter 2005 is primarily due to the expected decline in Zip revenue, partially offset by new lower cost external HDD products, supply chain improvements and other cost reduction actions.  The decrease of 260 basis points from the immediately preceding quarter is primarily due to a product mix shift toward Consumer Storage Solutions products, partially offset by improved gross margins on external HDD products.

Pre-tax profit from continuing operations for fourth quarter 2006 was $4.3 million.  Excluding a restructuring benefit of $0.8 million and a goodwill impairment charge of $0.8 million, fourth quarter 2006 non-GAAP pre-tax profit from continuing operations remained at $4.3 million.  This compares to fourth quarter 2005 non-GAAP pre-tax profit from continuing operations of $0.8 million, when excluding $0.8 million of restructuring charges.  Further, this compares to third quarter 2006 non-GAAP pre-tax profit from continuing operations of $2.2 million, when excluding a restructuring benefit of $0.2 million, a goodwill impairment charge of $2.5 million and a benefit of $1.1 million from the dissolution of an inactive European subsidiary.

Cash, cash equivalents and temporary investments at year-end amounted to $68.1 million, a decrease of $1.7 million from the end of third quarter 2006. This decrease is a result of increased inventory in transit as of year-end to satisfy existing backlog that has already been shipped to customers at this time as well as payments associated with previous restructuring actions.

During the fourth quarter, we received a final payment of $0.4 million from an escrow account related to the prior sale of Iomega's equity interest in a private company, ByteTaxi, Inc.  This is presented on the income statement as income from discontinued operations, net of taxes, of $0.3 million.

"I am pleased with our financial and operational results in the fourth quarter.  We achieved each and every goal we set for ourselves," said Jonathan Huberman, Vice Chairman and CEO.  "Since the new management team took the helm during first quarter 2006 and we set out a new strategic path, we have increased revenues and returned the company to profitability.  We achieved significant sequential revenue growth and, for the first time in many years, year over year growth.  While we were benefited by fourth quarter seasonality, the key business drivers of this growth were our new HDD product line, improved supply chain and the launch of our next generation REV drive. Between these actions and the cost reduction initiatives we took in April, we've posted two consecutive quarterly profits with strong revenue growth as well."

  Mr. Huberman continued, "As we look into 2007, our goals are:

  1.  To continue to grow and deliver sustained profitability,
  2.  To further increase the size of our external HDD business,
  3.  To continue to penetrate the high-growth NAS market with new products,
  4.  To ramp the REV 70GB Backup Drive and push for broad market adoption,
  5.  To grow our managed service business, and
  6.  Continue to seek opportunities to leverage Iomega's assets."

  Conference Call Information


As previously announced, Iomega will host a conference call with simultaneous audio webcast beginning at 4:30 p.m. Eastern Time today to discuss Iomega's fourth quarter financial results and management's goals and outlook.  The webcast may be accessed at http://www.iomega.com/ and will be available for replay through the close of business on February 15, 2007.

About Iomega

Iomega Corporation provides easy-to-use, high value storage solutions to help small- and mid-sized businesses and others protect, secure, capture and share their valuable digital information.  OfficeScreen(R), Iomega's managed security service for SMBs, features industry-leading firewall/VPN, SSL VPN and IPSec bundles that create secure wide area networks that connect remote offices and workers to applications and data at a company's headquarters, while countering security threats from hackers, worms and viruses across a company's entire network.  Iomega's award-winning storage products include the Iomega(R) REV(R) platform: the new Iomega REV 70GB Backup Drive, available in various computer interface models for server implementations; and the Iomega REV 35GB Backup Drive, available in several computer interface models for desktop backup and archive applications; as well as REV-based automation products such as the REV Loader 560, which utilizes a REV 70GB Backup Drive and up to eight removable REV disks.  Iomega also sells high-performance external hard drives, network hard drives and other HDD solutions; as well as other portable storage products.  For small and medium business networks, innovative Iomega NAS servers feature capacities of 250GB to 2TB. Iomega also has a comprehensive data recovery services solution for recovering lost data due to hardware failure, file corruption or media damage. The Company can be reached on the Web at http://www.iomega.com/.  Resellers can visit Iomega at http://www.iomega.com/ipartner.

Special Note Regarding Forward-Looking Statements

Statements contained in this release regarding the Company's business goals for 2007; and any other statements that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  All such statements are based upon information available to us as of February 1, 2007; and we disclaim any intention or obligation to update any such statements.  Actual results could differ materially from current expectations.  Factors that could cause or contribute to such differences include losses of key personnel; lower than anticipated sales of our products; any inability or failure to improve REV product sales, stabilize or improve HDD product gross margins; unexpected technical, manufacturing, or supply issues with our products; our inability to achieve a competitive cost structure; competition; our inability to maintain stringent quality assurance standards and customer satisfaction; difficulties in identifying and completing strategic opportunities to grow our business; intellectual property disputes; adverse final judgments in litigation; general economic and/or industry-specific conditions including significant changes in the landscape of data storage demand, pricing, or competition; faster than expected declines in Zip product sales and gross margins; and the other risks and uncertainties identified in the reports filed from time to time by Iomega with the U.S. Securities and Exchange Commission, including Iomega's most recent Annual Report on Form 10-K and quarterly report on Form 10-Q.

Copyright (C) 2007 Iomega Corporation.  All rights reserved.  Iomega, Zip, REV, OfficeScreen, StorCenter, iStorage, Micro Mini, and HotBurn are either registered trademarks or trademarks of Iomega Corporation in the United States and/or other countries.  Certain other product names, brand names and company names may be trademarks or designations of their respective owners.

  Media, please contact:
  Chris Romoser, Iomega Corporation, [phone], 

  Analysts/Investors, please contact:
  Preston Romm, Iomega Corporation, [phone], 


                            IOMEGA CORPORATION
                 CONDENSED STATEMENTS OF OPERATIONS - QTD
                  (In thousands, except per share data)
                               (Unaudited)

                               For the Three Months Ended
                   Dec. 31,    % of  Dec. 31,   % of    Oct. 1,   % of
                     2006     Sales   2005     Sales     2006    Sales
  Sales            $76,226    100.0% $70,029   100.0%   $53,595  100.0%
  Cost of Sales     60,824     79.8%  55,186    78.8%    41,379   77.2%
    Gross margin    15,402     20.2%  14,843    21.2%    12,216   22.8%

  Operating Expenses:
    Selling,
     general and
     administrative  9,917     13.0%  11,687    16.7%     8,657   16.2%
    Research and
     development     1,959      2.6%   2,901     4.1%     1,904    3.6%
    Goodwill
     impairment
     charge            793      1.0%       0     0.0%     2,513    4.7%
    Restructuring
     charges
     (reversals)      (829)    (1.1%)    806     1.2%      (211)  (0.4%)
      Total
       operating
       expenses     11,840     15.5%  15,394    22.0%    12,863   24.0%
  Operating
   Income (Loss)     3,562      4.7%    (551)   (0.8%)     (647)  (1.2%)
    Interest and
     other income
     and expense,
     net(1)            752      1.0%     561     0.8%     1,709    3.2%
  Income From
   Continuing
   Operations Before
   Income Taxes      4,314      5.7%      10     0.0%     1,062    2.0%
  Benefit
   (Provision) for
   Income Taxes        286      0.4%     729     1.0%      (209)  (0.4%)
  Net Income From
   Continuing
   Operations        4,600      6.0%     739     1.1%       853    1.6%
  Income From
   Discontinued
   ByteTaxi, Inc.
   Operations (net
   of taxes)(2)        272      0.4%   1,158     1.7%         0    0.0%
  Net Income        $4,872      6.4%  $1,897     2.7%      $853    1.6%

  Net Income
   Per Share         $0.09             $0.04              $0.02
  Diluted Income
   Per Share         $0.09             $0.04              $0.02
  Weighted Average
   Common Shares
   Outstanding      54,730            51,642             53,382
  Weighted Average
   Common Shares
   Outstanding -
   Assuming
   Dilution         55,191            51,642             53,389

  (1)  Q3 2006 includes approximately a $1.1 million gain associated with
       the release of various liabilities for a European subsidiary for
       which operations ceased in 1999.  The Company dissolved this entity
       in the third quarter of 2006.
  (2)  Q4 2005 relates to the sale of Iomega's investment in ByteTaxi, Inc.
       Q4 2006 relates to the final payment from an escrow account
       associated with the ByteTaxi, Inc. sale.



             PRODUCT SALES AND OPERATING INCOME (LOSS) - QTD
                              (In thousands)
                               (Unaudited)

                               For the Three Months Ended
                   Dec. 31,   % of   Dec. 31,   % of     Oct. 1, % of
                     2006     Sales    2005     Sales     2006   Sales
  Sales:
  Consumer
   Products:
    Consumer
     Storage
     Solutions(1)  $52,150    68.4%  $40,269    57.5%   $30,317   56.6%
     Zip             5,472     7.2%   12,310    17.6%     6,245   11.7%
  Business
   Products:
    REV             11,929    15.6%   12,443    17.8%    11,201   20.9%
    Network
     Storage
     Systems(2)      5,093     6.7%    4,730     6.8%     4,473    8.3%
    Services(3)      1,536     2.0%      149     0.2%     1,254    2.3%
  Other Products        46     0.1%      128     0.2%       105    0.2%
      Total Sales  $76,226           $70,029            $53,595

  Product
   Operating
   Income (Loss):
  Consumer Products:
    Consumer
     Storage
     Solutions(1)   $2,331           ($3,394)           ($1,744)
    Zip(4)           1,510             4,612                767
  Business
   Products:
    REV             (1,198)           (1,607)              (367)
    Network
     Storage
     Systems(2)        690               486                464
    Services(3)       (464)              131                (53)
  Other Products      (136)               27                 75
  Restructuring
   (charges)
   reversals           829              (806)               211
  Operating
   Income (Loss)    $3,562             ($551)             ($647)

  (1)  Consumer Storage Solutions is comprised of hard disk, optical, floppy
       and flash drives.
  (2)  Includes Network HDD products beginning in Q2 2006 -- previously
       classified in Consumer Storage Solutions.  Prior period data has been
       reclassified for consistency.
  (3)  Includes the System Integration and Managed Services businesses of
       CSCI, Inc. since August 2006, when acquired.  Also includes
       miscellaneous Iomega services previously classified in Other
       Products.  Prior period amounts have been reclassified for
       consistency.
  (4)  Q3 2006 and Q4 2006 includes a $2.5 million and a $0.8 million
       goodwill impairment charge, respectively.



                            IOMEGA CORPORATION
                 CONDENSED STATEMENTS OF OPERATIONS - YTD
                  (In thousands, except per share data)
                               (Unaudited)

                                  For the Twelve Months Ended
                         Dec. 31,       % of       Dec. 31,        % of
                           2006         Sales        2005          Sales
  Sales                 $229,554       100.0%     $264,505       100.0%
  Cost of Sales          183,342        79.9%      208,670        78.9%
    Gross margin          46,212        20.1%       55,835        21.1%

  Operating Expenses:
    Selling,
     general and
     administrative(1)    41,391        18.0%       60,535        22.9%
    Research and
     development           8,905         3.9%       14,054         5.3%
    License and patent
     fee income           (1,085)       (0.5%)      (1,301)       (0.5%)
    Goodwill impairment
     charges               8,728         3.8%            0         0.0%
    Restructuring
     charges               3,529         1.5%        7,579         2.9%
      Total operating
       expenses           61,468        26.8%       80,867        30.6%
  Operating Loss         (15,256)       (6.6%)     (25,032)       (9.5%)
    Interest and other
     income and
     expense, net(2)       3,865         1.7%          404         0.2%

  Loss From Continuing
   Operations Before
   Income Taxes          (11,391)       (5.0%)     (24,628)       (9.3%)
  Benefit for Income
   Taxes                   2,276         1.0%          945         0.4%
  Loss From Continuing
   Operations             (9,115)       (4.0%)     (23,683)       (9.0%)
  Income From
   Discontinued
   ByteTaxi, Inc.
   Operations (net of
   taxes)(3)                 272         0.1%          930         0.4%
  Net Loss               ($8,843)       (3.9%)    ($22,753)       (8.6%)

  Loss Per Share          ($0.17)                   ($0.44)
  Weighted Average
   Common Shares
   Outstanding            52,855                    51,623

  (1)  2006 includes $1.0 million of non-restructuring, severance related
       costs associated with prior CEO.
  (2)  2006 includes approximately a $1.1 million gain associated with the
       release of various liabilities for a European subsidiary for which
       operations ceased in 1999.  The Company dissolved this entity in the
       third quarter of 2006.
  (3)  Relates to the sale of Iomega's investment in ByteTaxi, Inc.  2005
       also includes operating losses incurred by ByteTaxi, Inc. prior to
       the sale.



             PRODUCT SALES AND OPERATING INCOME (LOSS) - YTD
                              (In thousands)
                               (Unaudited)

                                 For the Twelve Months Ended
                         Dec. 31,      % of        Dec. 31,      % of
                          2006         Sales        2005         Sales
  Sales:
  Consumer Products:
    Consumer Storage
     Solutions(1)       $134,149        58.4%     $133,482        50.5%
    Zip                   31,153        13.6%       64,101        24.2%

  Business Products:
    REV                   42,798        18.6%       45,932        17.4%
    Network Storage
     Systems(2)           17,817         7.8%       19,395         7.3%
    Services(3)            3,051         1.3%          605         0.2%
  Other Products             586         0.3%          990         0.4%
      Total Sales       $229,554                  $264,505

  Product Operating
   Income (Loss):
  Consumer Products:
    Consumer Storage
     Solutions(1)        ($9,335)                 ($24,843)
    Zip(4)                 3,384                    19,362
  Business Products:
    REV                   (6,940)                  (12,163)
    Network Storage
     Systems(2)            1,574                    (1,491)
    Services(3)             (290)                      227
  Other Products(6)(7)       875                     1,455
  Non-Restructuring
   charges(5)               (995)                        0
  Restructuring charges   (3,529)                   (7,579)
  Operating Loss        ($15,256)                 ($25,032)

  (1)  Consumer Storage Solutions is comprised of hard disk, optical, floppy
       and flash drives.
  (2)  Includes Network HDD products beginning in Q2 2006 -- previously
       classified in Consumer Storage Solutions.  Prior period data has been
       reclassified for consistency.
  (3)  Includes the System Integration and Managed Services businesses of
       CSCI, Inc. since August 2006 when acquired.  Also includes
       miscellaneous Iomega services previously classified in Other
       Products.  Prior period amounts have been reclassified for
       consistency.
  (4)  2006 includes $8.7 million of goodwill impairment charges.
  (5)  Non-restructuring, severance related costs associated with prior CEO
       and recorded in SG&A in above income statement.
  (6)  2006 includes $0.8 million of income associated with the sale of old
       patents.
  (7) 2005 includes license and patent income of $1.3 million.



                            IOMEGA CORPORATION
                         CONDENSED BALANCE SHEETS
                              (In thousands)
                               (Unaudited)

                                  Dec. 31,        Oct. 1,       Dec. 31,
                                    2006           2006           2005
  ASSETS:
    Cash and cash equivalents     $56,617         $55,315       $70,943
    Restricted cash                    88              87           256
    Temporary investments          11,443          14,414        24,800
      Total cash                   68,148          69,816        95,999
    Trade receivables              30,418          29,881        28,853
    Inventories                    42,593          34,803        27,532
    Deferred taxes                  2,714           5,523         5,523
    Other current assets            3,401           3,881         4,998
      Total Current Assets        147,274         143,904       162,905
    Property and equipment, net     6,553           7,159         8,311
    Intangible and other assets    13,554          14,397        12,453
                                 $167,381        $165,460      $183,669

  LIABILITIES AND
   STOCKHOLDERS' EQUITY:
    Accounts payable              $35,105         $31,579       $35,500
    Income taxes payable              454             832           310
    Other current liabilities(a)   32,475          44,715        49,751
      Total Current Liabilities    68,034          77,126        85,561
    Deferred taxes                  9,540          13,174        17,152
    Stockholders' equity(a)        89,807          75,160        80,956
                                 $167,381        $165,460      $183,669

  (a)  Other current liabilities has been reduced and retained earnings has
       been increased by $9.5 million due to a reduction of old tax reserves
       under SAB 108.



                 CONDENSED STATEMENTS OF CASH FLOWS - YTD
                              (In thousands)
                               (Unaudited)

                                                 For the Twelve Months Ended
                                                   Dec. 31,       Dec. 31,
                                                     2006           2005
  Cash Flows from Operating Activities:
    Net Loss                                       ($8,843)      ($22,753)
    Revenue and Expense Adjustments(1)               7,607          6,527
                                                    (1,236)       (16,226)
  Changes in Assets and Liabilities:
    Trade receivables                                 (279)         2,223
    Restricted cash                                    168           (256)
    Inventories                                    (14,195)         2,864
    Other current assets                             1,604          1,978
    Accounts payable                                  (593)           296
    Accrued restructuring                           (2,533)          (284)
    Other current liabilities and income taxes      (5,868)       (16,543)
      Net cash used in operating activities        (22,932)       (25,948)

  Cash Flows from Investing Activities:
    Purchases of property and equipment             (1,906)        (1,421)
    Proceeds from sales of assets                      191            745
    Proceeds from sale of ByteTaxi
     (net of $155,000 cash)                              0          2,290
    Initial investment in ByteTaxi
     (net of $171,000 cash)                              0            (44)
    Purchase of CSCI, Inc.
     (net of $183,000 cash)                         (4,339)             0
    Sales of temporary investments                  30,856         33,914
    Purchases of temporary investments             (17,080)       (41,266)
    Proceeds from ByteTaxi escrow fund                 446              0
    Net change in other assets
     and other liabilities                               7           (660)
      Net cash provided by (used in)
       investing activities                          8,175         (6,442)

  Cash Flows from Financing Activities:
    Payment of debt                                      0           (139)
    Proceeds from sales of Common Stock                431             69
      Net cash provided by (used in)
       financing activities                            431            (70)
  Net Decrease in Cash and
   Cash Equivalents                                (14,326)       (32,460)
  Cash and Cash Equivalents at
   Beginning of Period                              70,943        103,403
  Cash and Cash Equivalents at End of Period       $56,617        $70,943

  (1)  2006 includes $8.7 million of non-cash, goodwill impairment charges.


DATASOURCE: Iomega Corporation



CONTACT:  Media, Chris Romoser, [phone], , or

Analysts/Investors, Preston Romm, [phone], , both of

Iomega Corporation



Web site:  http://www.iomega.com/ 

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