Iomega Reports First Quarter Results and Restructuring Actions

SAN DIEGO, April 27 /PRNewswire-FirstCall/ -- Iomega Corporation (NYSE: IOM) today reported revenue of $59.1 million and a net loss of $4.2 million, or ($0.08) per share, for the quarter ended April 2, 2006. These results included a $3.1 million pre-tax, non-cash goodwill impairment charge associated with the Zip(R) product line, $1.0 million of pre-tax, non-restructuring severance costs associated with the departure of the prior CEO, and $0.3 million of pre-tax restructuring charges. In comparison, first quarter 2005 revenue was $72.9 million with a net loss of $5.9 million, or ($0.11) per share, which included $0.2 million in pre-tax restructuring charges.

First quarter 2006 revenue of $59.1 million decreased $13.8 million, or 19%, compared to first quarter 2005. The decrease was primarily due to lower Zip, optical, Mini USB flash and REV(R) product sales, partially offset by increased sales of hard disk drive (HDD) products. The first quarter 2006 gross margin percentage was 20.0%, compared to 22.7% for first quarter 2005, reflective of the product mix trending more toward Consumer Storage Solutions products as compared to last year. First quarter 2006 operating expenses were $18.4 million, which included the $3.1 million pre-tax, non-cash goodwill impairment charge associated with the Zip product line, $1.0 million of pre-tax non-restructuring severance costs associated with the departure of the prior CEO, and $0.3 million of pre-tax restructuring charges associated with other management changes. By comparison, first quarter 2005 operating expenses were $22.4 million, which included $0.2 million of restructuring charges. The first quarter 2006 operating loss was $6.6 million, including the pre-tax goodwill impairment, non-restructuring severance and restructuring charges described above, compared to a first quarter 2005 operating loss of $5.9 million, including restructuring. Excluding the non-restructuring severance ($1.0 million), restructuring ($0.3 million) and goodwill impairment charges ($3.1 million) from the first quarter 2006 operating loss of $6.6 million, the non-GAAP, adjusted first quarter 2006 operating loss was $2.2 million.

First quarter 2006 product sales of $59.1 million included REV product sales of $10.8 million; Consumer Storage Solutions product sales (consisting of HDD, optical, Mini USB flash and floppy drives) of $33.2 million; Network Storage Solutions (NSS) sales of $3.2 million; and Zip product sales of $11.6 million.

During first quarter 2006, the Company's total cash, cash equivalents, and temporary investments decreased by $7.8 million to $88.2 million as of April 2, 2006. The decrease was primarily a result of payments on seasonally higher accounts payable from the fourth quarter, and payments associated with previous restructuring actions.

Today, Iomega also announced a restructuring plan to reduce costs. The restructuring plan includes a workforce reduction of approximately 75 employees. Additionally, 13 positions have already been eliminated since the beginning of the year for a total workforce reduction of about 30%. The Company anticipates these actions along with other business changes will result in annual cost savings of $20 million to $25 million as compared to first quarter 2006 annualized run rates, when fully implemented by the end of the third quarter. Approximately 85% of the cost reductions are expected to be in operating expenses, with the remainder in fixed overhead. The cost reductions include the workforce reduction, consolidation of facilities and other spending reductions.

The restructuring and other associated charges, expected to range between $3 million to $4 million, are anticipated to be recorded in the second and third quarters. These charges will reflect expenses associated with the workforce reduction; lease expenses associated with unutilized and closed facilities; termination of contractual obligations; asset write-downs and other miscellaneous charges. Substantially all of the restructuring charges are expected to be cash charges.

"Our new management team has accelerated the pace of change at Iomega and has made progress on many fronts," said Jonathan Huberman, Chief Executive Officer of Iomega Corporation. "We have taken actions to reduce costs and named new leadership in the posts of CEO, COO, CFO and key positions within our sales and product marketing teams. We have taken steps to streamline the organization and created unified R&D and product marketing groups while eliminating certain consumer electronics initiatives to focus on doing what we do best -- providing storage solutions for home offices and small- to medium-sized businesses. We have also undertaken a strategic review of each product line and created plans to improve profitability across each line. Additionally, we made progress toward completion of the next generation REV product slated for delivery in the second half of 2006.

"These actions, although difficult, are necessary to ensure that Iomega starts off this next phase of its life on solid ground," continued Huberman. "Our short-term goals are to achieve individual product line profitability without relying upon the declining Zip business. Overall, I am pleased with the progress we have made over the last sixty days. However, we will continue to implement other changes as needed to increase our speed, time to market, accountability and profitability. In addition to improving our current business, we have already begun to evaluate strategic opportunities to grow our business through product sourcing, alliances, partnerships, and M&A. We will seek logical extensions to our REV, NAS and HDD product lines as well as investigate opportunities to leverage our brand, infrastructure and worldwide channel presence. We look forward to reporting on our progress in the months and quarters to come."

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 first 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 Thursday, May 11, 2006.

About Iomega

Iomega Corporation provides easy-to-use, high value storage solutions to help people protect, secure, capture and share their valuable digital information. Iomega's award-winning storage products include the Iomega(R) REV(R) 35GB drive, available in several computer interface models, as well as two automation solutions: the rack mount REV 1000 Autoloader and the new desktop form factor REV Loader 280; Zip(R) 100MB, 250MB and 750MB drives; high-performance Iomega external hard drives and HDD solutions such as the Iomega StorCenter(TM) Network Hard Drive, available in multiple capacity sizes, including a new 1TB wireless model; Iomega Mini USB Flash drives, Micro Mini(TM) USB Flash drives; Iomega external CD-RW drives; Iomega Super DVD drives; and Iomega floppy USB-powered drives. Iomega simplifies data protection and sharing at home and in the workplace with Iomega Automatic Backup software and HotBurn(R) CD-recording software. For networks, Iomega NAS servers offer capacities of 160GB to 1.6TB. For unlimited capacity and anytime, anywhere access, Iomega offers iStorage(TM) secure online storage for personal and professional use. Iomega also offers businesses and consumers a comprehensive data recovery services solution for recovering lost data due to hardware failure, file corruption or media damage. The Company can be reached at 1-888-4-IOMEGA (888-446-6342), or on the Web at http://www.iomega.com/.

Special Note Regarding Forward-Looking Statements

Statements contained in this release regarding the Company's short-term goals and plans to improve profitability across each product line; the expected results of our restructuring plan; Iomega's focus in the future; the expected launch of our next generation REV product in the second half of 2006; expected restructuring charges and savings; plans to seek extensions of our product lines and to leverage our brand, infrastructure, and channels; expected future costs; 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 April 27, 2006, 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 including possibly as a result of restructuring actions; lower than anticipated sales of our products; any inability or failure to improve REV product sales 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; manufacturing and inventory issues; 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; 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.

Copyright(C) 2006 Iomega Corporation. All rights reserved. Iomega, Zip, REV, StorCenter, ScreenPlay, Mixx, Active Disk, 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, (858) 314-7148 romoser@iomega.com

  Analysts/Investors, please contact:

  Preston Romm, Iomega Corporation, (858) 314-7188 romm@iomega.com



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

                                    For the Three Months Ended
                     Apr. 2,    % of    Apr. 3,    % of    Dec. 31,   % of
                      2006     Sales     2005     Sales     2005     Sales
  Sales              $59,081   100.0%   $72,912   100.0%   $70,029   100.0%
  Cost of Sales       47,280    80.0%    56,385    77.3%    55,186    78.8%
    Gross margin      11,801    20.0%    16,527    22.7%    14,843    21.2%

  Operating Expenses:
    Selling,
     general and
     admini-
     strative (1)     12,460    21.1%    18,208    25.0%    11,687    16.7%
    Research and
     development       2,567     4.3%     3,999     5.5%     2,901     4.1%
    License and
     patent fees           0     0.0%        (7)   (0.0%)        0     0.0%
    Goodwill
     impairment
     charge            3,081     5.2%         0     0.0%         0     0.0%
    Restructuring
     charges             278     0.5%       235     0.3%       806     1.2%
      Total
       operating
       expenses       18,386    31.1%    22,435    30.8%    15,394    22.0%
  Operating Loss      (6,585)  (11.1%)   (5,908)   (8.1%)     (551)   (0.8%)
    Interest and
     other income
     and expense, net  1,014     1.7%      (451)   (0.6%)      561     0.8%
  Income (Loss)
   From Continuing
   Operations Before
   Income Taxes       (5,571)   (9.4%)   (6,359)   (8.7%)       10     0.0%
  Benefit for
   Income Taxes        1,402     2.4%       494     0.7%       729     1.0%
  Income (Loss)
   From Continuing
   Operations         (4,169)   (7.1%)   (5,865)   (8.0%)      739     1.1%
  Gain (Loss)
   From Discontinued
   ByteTaxi, Inc.
   Operations
   (net of taxes)          0                (60)             1,158
  Net Income (Loss)  ($4,169)           ($5,925)            $1,897

  Basic Earnings
   (Loss) Per Share   ($0.08)            ($0.11)             $0.04
  Diluted Earnings
   (Loss) Per Share   ($0.08)            ($0.11)             $0.04
  Weighted Average
   Common Shares
   Outstanding        51,649             51,611             51,642
  Weighted Average
   Common Shares
   Assuming
   Dilution           51,649             51,611             51,642

  (1) Q1 2006 includes $1.0 million of non-restructuring, severance
      related costs associated with prior CEO.



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

                                    For the Three Months Ended
                     Apr. 2,    % of    Apr. 3,    % of    Dec. 31,   % of
                      2006     Sales     2005     Sales     2005     Sales

  Sales:
  Consumer Products:
    Zip              $11,643    19.7%   $20,145    27.6%   $12,310    17.6%
    Consumer Storage
     Solutions (1)    33,189    56.2%    36,431    50.0%    41,685    59.5%
  Business Products:
    REV               10,779    18.2%    12,093    16.6%    12,443    17.8%
    Network Storage
     Systems           3,199     5.4%     3,785     5.2%     3,314     4.7%
  Other Products (2)     271     0.5%       458     0.6%       277     0.4%
      Total Sales    $59,081            $72,912            $70,029

  Product Operating
   Income (Loss):
  Consumer Products:
    Zip (3)           $1,059             $6,491             $4,612
    Consumer Storage
     Solutions (1)    (4,754)            (7,245)            (3,072)
  Business Products:
    REV               (1,616)            (3,962)            (1,607)
    Network Storage
     Systems             (58)              (970)               164
  Other Products (2)      57                 13                158
  Non-Restructuring
   charges (4)          (995)                 0                  0
  Restructuring
   charges              (278)              (235)              (806)
  Operating Loss     ($6,585)           ($5,908)             ($551)

  (1) Consumer Storage Solutions is comprised of hard disk, optical, flash
      and floppy drives.
  (2) Other Products is comprised of Jaz and other miscellaneous products.
  (3) Q1 2006 includes a $3.1 million goodwill impairment charge.
  (4) Non-restructuring, severance related costs associated with prior CEO
      and recorded in SG&A in above income statement.



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

                                                     Apr. 2,     Dec. 31,
                                                      2006        2005
  ASSETS:
    Cash and cash equivalents                        $60,829      $70,943
    Restricted cash                                       82          256
    Temporary investments                             27,278       24,800
      Total cash                                      88,189       95,999
    Trade receivables                                 22,939       28,853
    Inventories                                       26,571       27,532
    Deferred taxes                                     5,523        5,523
    Other current assets                               6,135        4,998
      Total Current Assets                           149,357      162,905
    Property and equipment, net                        7,341        8,311
    Intangible and other assets                        8,887       12,453
                                                    $165,585     $183,669

  LIABILITIES AND STOCKHOLDERS' EQUITY:
    Accounts payable                                 $26,829      $35,500
    Income taxes payable                                   0          310
    Other current liabilities                         45,983       49,751
      Total Current Liabilities                       72,812       85,561
    Deferred taxes                                    15,945       17,152
    Stockholders' equity                              76,828       80,956
                                                    $165,585     $183,669



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

                                                 For the Three Months Ended
                                                     Apr. 2,      Apr. 3,
                                                      2006         2005
  Cash Flows from Operating Activities:
    Net Loss                                         ($4,169)     ($5,925)
    Revenue and Expense Adjustments (1)                3,239        2,468
                                                        (930)      (3,457)

  Changes in Assets and Liabilities:
    Trade receivables                                  6,036        1,656
    Restricted cash                                      174         (278)
    Inventories                                          961       (3,304)
    Other current assets                                (894)         982
    Accounts payable                                  (8,671)      (1,622)
    Accrued restructuring                             (1,177)      (1,340)
    Other current liabilities and income taxes        (3,144)      (8,407)
      Net cash used in operating activities           (7,645)     (15,770)

  Cash Flows from Investing Activities:
    Purchases of property and equipment                 (165)        (462)
    Proceeds from sales of assets                         21           85
    Initial investment in ByteTaxi
     (net of $171,000 cash)                                0          (44)
    Sales of temporary investments                     4,500        6,233
    Purchases of temporary investments                (6,846)     (14,871)
    Net change in other assets and
     other liabilities                                     0         (708)
      Net cash used in investing activities           (2,490)      (9,767)

  Cash Flows from Financing Activities:
    Proceeds from sales of Common Stock                   21            5
      Net cash provided by financing activities           21            5
  Net Decrease in Cash and Cash Equivalents          (10,114)     (25,532)
  Cash and Cash Equivalents at Beginning of Period    70,943      103,403
  Cash and Cash Equivalents at End of Period         $60,829      $77,871

  (1) Q1 2006 includes a $3.1 million non-cash, goodwill impairment charge.