Troubled data storage products company Iomega Corp has announced its latest cost-cutting moves, which include 140 new job cuts and pre-tax restructuring charges of $25m to $35m. The Roy, Utah- based company will take about $20m of the overall hit in the recently-completed third quarter, with the rest absorbed in the fourth quarter. On top of that, Iomega said, in light of cumulative losses the past two years, it will increase the valuation allowance for its deferred tax assets – which will add roughly another $50m in non-cash expenses to the third quarter’s numbers.
Excluding those one-time items, Iomega said that it already expects a pre-tax loss for the quarter of approximately $5m on revenues expected to be slightly higher than the $349m reported in the second quarter. Analysts surveyed by First Call were expecting a third-quarter loss of $0.01 per share. In addition, the expected $5m loss includes $12m in other pre-tax, non-cash charges not directly related to restructuring, the company said. In the year-ago third quarter, Iomega reported a loss of $7.6m, or $0.03 a share.
The current restructuring plan includes the consolidation of worldwide media manufacturing, including the closure of a production site in Avranches, France and the consolidation of leased facilities in Utah and Colorado. It also includes the shift of the Clik! platform from the Clik! Mobile Bundle to the newer Clik! PC Card Drive. The 140 job cuts will mostly affect workers outside the US. The company, which in June announced 450 job cuts and a second-quarter restructuring charge of $45m, hopes the latest moves will accelerate its return to profitability. Over the past six quarters, Iomega has reported a profit only once.
Iomega also said that it has not borrowed any funds under its $150m credit facility during 1999 and that its cash balances are expected to grow from $89m at the end of the second quarter to more than $130m at the end of the third quarter. In addition, it will seek to reduce the amount of the credit facility in accordance with its reduced financing needs. The company will report full third-quarter results on October 14.
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