(Mark One)
|
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
|
EXCHANGE
ACT OF 1934
|
Delaware
|
86-0385884
|
(State
or other jurisdiction
of
incorporation or organization)
|
(IRS
employer identification
number)
|
Common
Stock, par value $0.03 1/3
|
54,763,820
|
(Title
of each class)
|
(Number
of shares)
|
Page
|
Note
Regarding Forward-Looking
Statements.......................................................................................................................
|
2
|
and
December 31,
2006.........................................................................................................................................
|
3
|
Ended September 30, 2007 and October
1,
2006................................................................................................
|
4
|
Ended September 30, 2007 and October
1,
2006...............................................................................................
|
5
|
Ended September 30, 2007 and October 1,
2006...............................................................................................
|
6
|
Notes to Condensed Consolidated
Financial
Statements..................................................................................
|
7
|
Condition and Results of
Operations.................................................................................................................
|
25
|
Item
3. Quantitative and
Qualitative Disclosures About Market
Risk..........................................................................
|
41
|
Item
4. Controls and
Procedures.........................................................................................................................................
|
41
|
Item
1. Legal
Proceedings....................................................................................................................................................
|
42
|
Item
1A. Risk
Factors...............................................................................................................................................................
|
42
|
Item
2. Unregistered Sales of
Equity Securities and Use of
Proceeds...........................................................................
|
49
|
Item
6. Exhibits........................................................................................................................................................................
|
49
|
Signatures.................................................................................................................................................................................
|
50
|
Exhibit
Index................................................................................................................................................................................
|
51
|
·
|
Our
goals for 2007, which are: (1) to continue to grow and deliver sustained
profitability; (2) to further increase the size of our HDD business;
(3)
to continue to penetrate the high-growth NAS market; (4) to ramp
REV®
70GB products
and push for broad market adoption; (5) to grow our managed services
business domestically and abroad; and (6) to continue to evaluate
new
opportunities where we can leverage our brand and channel
assets;
|
·
|
Our
goal of increasing cash flow from
operations;
|
·
|
Our
goal to achieve 2007 full year profitability and positive cash flow
from
operations through containing operating expense spending, growing
HDD
sales, maintaining or improving the gross margins of HDD and growing
REV
product sales;
|
·
|
References
to the ongoing efforts to complete our transition to a new distribution
and logistics supplier;
|
·
|
References
to our fourth quarter being seasonally strong, or our summer months
being
seasonally slow in Europe due to
holidays;
|
·
|
Expected
future taxes including taxes on repatriation of cash from Europe
to the
U.S.;
|
·
|
References
to expected volatility, expected term and value of stock
options;
|
·
|
The
Section below entitled “Risk Factors”, including all discussions therein
concerning things that could happen to Iomega®,
its
products, employees, profits or other aspects of the business in
the
future;
|
·
|
All
references to our focus or intended focus for our sales efforts
and
|
·
|
The
belief that our balance of cash, cash equivalents and temporary
investments, together with cash flows from future operations, will
be
sufficient to fund anticipated working capital requirements, funding
of
restructuring actions, capital expenditures and cash required for
other
activities for at least one year.
|
Sept.
30, 2007
|
Dec.
31, 2006
|
|||||||
(Unaudited)
|
||||||||
Current
Assets:
|
||||||||
Cash
and cash
equivalents
|
$ |
53,356
|
$ |
56,617
|
||||
Restricted
cash
|
92
|
88
|
||||||
Temporary
investments
|
15,919
|
11,443
|
||||||
Trade
receivables, less
allowance for doubtful accounts of
$1,627
at Sept. 30, 2007 and
$1,535 at Dec. 31, 2006
|
48,016
|
30,418
|
||||||
Inventories
|
68,183
|
42,593
|
||||||
Deferred
income
taxes
|
1,997
|
2,747
|
||||||
Other
current
assets
|
2,729
|
3,401
|
||||||
Total
Current
Assets
|
190,292
|
147,307
|
||||||
Property
and Equipment, at Cost
|
70,705
|
84,845
|
||||||
Accumulated
Depreciation
|
(66,247 | ) | (78,292 | ) | ||||
Net
Property and
Equipment
|
4,458
|
6,553
|
||||||
Goodwill
|
9,818
|
12,451
|
||||||
Other
Intangibles, Net
|
891
|
1,043
|
||||||
Other
Assets
|
10
|
60
|
||||||
Total
Assets
|
$ |
205,469
|
$ |
167,414
|
||||
Current
Liabilities:
|
||||||||
Accounts
payable
|
$ |
72,145
|
$ |
35,105
|
||||
Other
current
liabilities
|
26,182
|
32,475
|
||||||
Income
taxes
payable
|
1,830
|
454
|
||||||
Total
Current
Liabilities
|
100,157
|
68,034
|
||||||
Deferred
Income Taxes
|
7,829
|
9,573
|
||||||
Other
Liabilities
|
3,064
|
-
|
||||||
Commitments
and Contingencies (Notes 4 and 5)
|
||||||||
Stockholders’
Equity:
|
||||||||
Common
Stock, $0.03 1/3 par
value - authorized 400,000,000
shares,
issued 55,337,770
shares at September 30, 2007 and
55,307,270
shares at December
31, 2006
|
1,847
|
1,846
|
||||||
Additional
paid-in
capital
|
60,713
|
59,635
|
||||||
Less:
575,200 Common Stock
treasury shares, at cost, at
September
30, 2007 and December
31, 2006
|
(5,662 | ) | (5,662 | ) | ||||
Retained
earnings
|
37,521
|
33,988
|
||||||
Total
Stockholders’
Equity
|
94,419
|
89,807
|
||||||
Total
Liabilities and Stockholders’ Equity
|
$ |
205,469
|
$ |
167,414
|
For
the Three Months Ended
|
||||||||
Sept.
30,
2007
|
Oct.
1,
2006
|
|||||||
(Unaudited)
|
||||||||
Sales
|
$ |
80,667
|
$ |
53,595
|
||||
Cost
of sales
|
67,714
|
41,379
|
||||||
Gross
Margin
|
12,953
|
12,216
|
||||||
Operating
Expenses:
|
||||||||
Selling,
general and
administrative
|
9,452
|
8,216
|
||||||
Research
and
development
|
1,872
|
1,904
|
||||||
Restructuring
reversals
|
(153 | ) | (211 | ) | ||||
Goodwill
impairment
charge
|
-
|
2,513
|
||||||
Bad
debt
expense
|
668
|
441
|
||||||
Total
Operating
Expenses
|
11,839
|
12,863
|
||||||
Operating
income (loss)
|
1,114
|
(647 | ) | |||||
Interest
income
|
792
|
722
|
||||||
Interest
expense and other income (expense), net
|
(64 | ) |
987
|
|||||
Income
before income
taxes
|
1,842
|
1,062
|
||||||
Provision
for income taxes
|
(549 | ) | (209 | ) | ||||
Net
Income
|
$ |
1,293
|
$ |
853
|
||||
Net
Income Per Basic Share
|
$ |
0.02
|
$ |
0.02
|
||||
Net
Income Per Diluted Common Share
|
$ |
0.02
|
$ |
0.02
|
||||
Weighted
Average Common Shares Outstanding
|
54,754
|
53,382
|
||||||
Weighted
Average Common Shares Outstanding - Assuming Dilution
|
55,518
|
53,389
|
For
the Nine Months Ended
|
||||||||
Sept.
30,
2007
|
Oct.
1,
2006
|
|||||||
(Unaudited)
|
||||||||
Sales
|
$ |
215,970
|
$ |
153,328
|
||||
Cost
of sales
|
176,575
|
122,518
|
||||||
Gross
Margin
|
39,395
|
30,810
|
||||||
Operating
Expenses:
|
||||||||
Selling,
general and
administrative
|
30,233
|
31,308
|
||||||
Research
and
development
|
5,395
|
6,946
|
||||||
Restructuring
charges
(reversals)
|
(235 | ) |
4,358
|
|||||
Goodwill
impairment
charges
|
2,963
|
7,935
|
||||||
License
and patent fee
income
|
(452 | ) | (1,085 | ) | ||||
Bad
debt
expense
|
302
|
166
|
||||||
Total
Operating
Expenses
|
38,206
|
49,628
|
||||||
Operating
income (loss)
|
1,189
|
(18,818 | ) | |||||
Interest
income
|
2,066
|
2,261
|
||||||
Interest
expense and other income (expense), net
|
(171 | ) |
852
|
|||||
Income
(loss) before income
taxes
|
3,084
|
(15,705 | ) | |||||
Benefit
for income taxes
|
449
|
1,990
|
||||||
Net
Income (Loss)
|
$ |
3,533
|
$ | (13,715 | ) | |||
Net
Income (Loss) Per Basic Share
|
$ |
0.06
|
$ | (0.26 | ) | |||
Net
Income (Loss) Per Diluted Common Share
|
$ |
0.06
|
$ | (0.26 | ) | |||
Weighted
Average Common Shares Outstanding
|
54,741
|
52,230
|
||||||
Weighted
Average Common Shares Outstanding - Assuming Dilution
|
55,093
|
52,230
|
For
the Nine Months Ended
|
||||||||
Sept.
30,
2007
|
Oct.
1,
2006
|
|||||||
(Unaudited)
|
||||||||
Cash
Flows from Operating Activities:
|
||||||||
Net
income
(loss)
|
$ |
3,533
|
$ | (13,715 | ) | |||
Adjustments
to Reconcile Net
Income (Loss) to Cash Flows from Operations:
|
||||||||
Depreciation
and
amortization
|
2,445
|
3,538
|
||||||
Deferred
income tax
benefit
|
(994 | ) | (3,978 | ) | ||||
Tax
contingency
releases
|
(1,259 | ) |
-
|
|||||
Stock-related
compensation
expense
|
770
|
503
|
||||||
Goodwill
impairment
charges
|
2,963
|
7,935
|
||||||
Non-cash
inventory write-offs
(reversals)
|
691
|
(780 | ) | |||||
Bad
debt
expense
|
302
|
166
|
||||||
Other
|
(197 | ) | (541 | ) | ||||
Changes
in Assets and
Liabilities (net of effects of 2006 acquisition):
|
||||||||
Restricted
cash
|
(4 | ) |
169
|
|||||
Trade
receivables
|
(17,900 | ) |
359
|
|||||
Inventories
|
(26,281 | ) | (6,405 | ) | ||||
Other
current
assets
|
672
|
1,124
|
||||||
Accounts
payable
|
37,040
|
(4,119 | ) | |||||
Other
current
liabilities
|
(207 | ) | (4,967 | ) | ||||
Accrued
restructuring
|
(1,763 | ) | (874 | ) | ||||
Income
taxes
|
1,376
|
522
|
||||||
Net
cash provided by (used in)
operating activities
|
1,187
|
(21,063 | ) | |||||
Cash
Flows from Investing Activities:
|
||||||||
Purchases
of property and
equipment
|
(301 | ) | (1,558 | ) | ||||
Proceeds
from sales of
assets
|
136
|
173
|
||||||
Purchases
of temporary
investments
|
(20,206 | ) | (13,425 | ) | ||||
Sales
of temporary
investments
|
15,894
|
24,161
|
||||||
Payments
associated with CSCI,
Inc. acquisition
|
(120 | ) | (4,339 | ) | ||||
Net
change in other assets and
other liabilities
|
50
|
7
|
||||||
Net
cash provided by (used in)
investing activities
|
(4,547 | ) |
5,019
|
|||||
Cash
Flows from Financing Activities:
|
||||||||
Proceeds
from sales of Common
Stock
|
99
|
416
|
||||||
Net
cash provided by financing
activities
|
99
|
416
|
||||||
Net
Decrease in Total Cash and Cash Equivalents
|
(3,261 | ) | (15,628 | ) | ||||
Total
Cash and Cash Equivalents at Beginning of Period
|
56,617
|
70,943
|
||||||
Total
Cash and Cash Equivalents at End of Period
|
$ |
53,356
|
$ |
55,315
|
||||
Non-Cash
Investing and Financing Activities:
|
||||||||
Issuance
of treasury stock in
CSCI, Inc. acquisition
|
$ |
-
|
$ |
7,000
|
||||
Adjustment
of CSCI, Inc.
acquisition
|
$ |
210
|
$ |
-
|
||||
Sept.
30,
|
Dec.
31,
|
|||||||
2007
|
2006
|
|||||||
(In
thousands)
|
||||||||
Raw
materials
|
$ |
32,247
|
$ |
16,475
|
||||
Finished
goods
|
35,936
|
26,118
|
||||||
$ |
68,183
|
$ |
42,593
|
Net
Income (Loss) (Numerator)
|
Shares
(Denominator)
|
Per
Share Amount
|
||||||||||
(In
thousands, except per share data)
|
||||||||||||
For
the Three Months Ended:
|
||||||||||||
September
30, 2007:
|
||||||||||||
Basic
EPS
|
$ |
1,293
|
54,754
|
$ |
0.02
|
|||||||
Effect
of
options
|
-
|
764
|
-
|
|||||||||
Diluted
EPS
|
$ |
1,293
|
55,518
|
$ |
0.02
|
|||||||
October
1, 2006:
|
||||||||||||
Basic
EPS
|
$ |
853
|
53,382
|
$ |
0.02
|
|||||||
Effect
of
options
|
-
|
7
|
-
|
|||||||||
Diluted
EPS
|
$ |
853
|
53,389
|
$ |
0.02
|
|||||||
For
the Nine Months Ended:
|
||||||||||||
September
30, 2007:
|
||||||||||||
Basic
EPS
|
$ |
3,533
|
54,741
|
$ |
0.06
|
|||||||
Effect
of
options
|
-
|
352
|
-
|
|||||||||
Diluted
EPS
|
$ |
3,533
|
55,093
|
$ |
0.06
|
|||||||
October
1, 2006:
|
||||||||||||
Basic
EPS
|
$ | (13,715 | ) |
52,230
|
$ | (0.26 | ) | |||||
Effect
of
options
|
-
|
-
|
-
|
|||||||||
Diluted
EPS
|
$ | (13,715 | ) |
52,230
|
$ | (0.26 | ) |
For
the Three Months Ended
|
For
the Nine Months Ended
|
|||||||||||||||
Sept.
30,
|
Oct.
1,
|
Sept.
30,
|
Oct.
1,
|
|||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Out
of the money options
|
231,492
|
2,674,578
|
677,392
|
1,764,578
|
For
the Three Months Ended
|
For
the Nine Months Ended
|
|||
Assumption
|
Sept.
30,
2007
|
Oct.
1,
2006
|
Sept.
30,
2007
|
Oct.
1,
2006
|
(In
thousands)
|
||||
Average
expected term (in years)
|
5.2
|
3.9
|
5.2
|
3.9
|
Expected
stock price volatility
|
39%
|
47%
|
39%
|
56%
|
Risk-free
interest rate (range)
|
4.1
– 5.0%
|
4.6
– 4.9%
|
4.1
– 5.1%
|
4.3
- 5.1%
|
Expected
dividends
|
Zero
|
Zero
|
Zero
|
Zero
|
For
the Three Months Ended
|
For
the Nine Months Ended
|
|||||||||||||||
Sept.
30 ,
|
Oct.
1,
|
Sept.
30,
|
Oct.
1,
|
|||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Balance
at beginning of period
|
$ |
4,989
|
$ |
4,077
|
$ |
4,576
|
$ |
4,973
|
||||||||
Accruals/additions
|
1,341
|
1,372
|
4,612
|
3,009
|
||||||||||||
Claims
|
(1,163 | ) | (1,261 | ) | (4,021 | ) | (3,794 | ) | ||||||||
Balance
at end of period
|
$ |
5,167
|
$ |
4,188
|
$ |
5,167
|
$ |
4,188
|
Business
Categories
|
Reportable
Segments
|
Consumer
Products
|
1. Consumer
Storage Solutions
|
2. Zip®
Products
|
|
Business
Products
|
3. REV®
Products
|
4. Network
Storage Systems
|
|
5. Services
|
|
Other
Products
|
6. Other
Products
|
For
the Quarter Ended
|
For
the Nine Months Ended
|
|||||||||||||||
Sept.
30,
2007
|
Oct.
1,
2006
|
Sept.
30,
2007
|
Oct.
1,
2006
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Sales:
|
||||||||||||||||
Consumer
Products:
|
||||||||||||||||
Consumer
Storage
Solutions
|
$ |
60,685
|
$ |
30,317
|
$ |
153,262
|
$ |
81,999
|
||||||||
Zip
Products
|
3,816
|
6,245
|
13,097
|
25,681
|
||||||||||||
Total
Consumer
Products
|
64,501
|
36,562
|
166,359
|
107,680
|
||||||||||||
Business
Products:
|
||||||||||||||||
REV
Products
|
8,981
|
11,201
|
29,388
|
30,869
|
||||||||||||
Network
Storage
Systems
|
5,523
|
4,473
|
15,077
|
12,724
|
||||||||||||
Services
|
1,653
|
1,254
|
4,898
|
1,515
|
||||||||||||
Total
Business
Products
|
16,157
|
16,928
|
49,363
|
45,108
|
||||||||||||
Other
Products
|
9
|
105
|
248
|
540
|
||||||||||||
Total
Sales
|
$ |
80,667
|
$ |
53,595
|
$ |
215,970
|
$ |
153,328
|
||||||||
Product
Operating Income (Loss):
|
||||||||||||||||
Consumer
Products:
|
||||||||||||||||
Consumer
Storage
Solutions
|
$ | (545 | ) | $ | (1,744 | ) | $ | (141 | ) | $ | (11,666 | ) | ||||
Zip
Products
|
1,224
|
767
|
1,804
|
1,874
|
||||||||||||
Total
Consumer
Products
|
679
|
(977 | ) |
1,663
|
(9,792 | ) | ||||||||||
Business
Products:
|
||||||||||||||||
REV
Products
|
204
|
(367 | ) |
234
|
(5,742 | ) | ||||||||||
Network
Storage
Systems
|
566
|
464
|
211
|
884
|
||||||||||||
Services
|
(349 | ) | (53 | ) | (1,404 | ) |
174
|
|||||||||
Total
Business
Products
|
421
|
44
|
(959 | ) | (4,684 | ) | ||||||||||
Other
Products
|
(139 | ) |
75
|
250
|
1,011
|
|||||||||||
Non-restructuring
charge
|
-
|
–
|
-
|
(995 | ) | |||||||||||
Restructuring
(charges) reversals
|
153
|
211
|
235
|
(4,358 | ) | |||||||||||
Total
Operating Income
(Loss)
|
$ |
1,114
|
$ | (647 | ) | $ |
1,189
|
$ | (18,818 | ) |
Sept.
30,
|
Dec.
31,
|
|||||||
2007
|
2006
|
|||||||
(In
thousands)
|
||||||||
Other
Current Liabilities:
|
||||||||
Third
Quarter 2001 restructuring actions
|
$ |
-
|
$ |
1,366
|
||||
2003
restructuring actions
|
-
|
6
|
||||||
2004
restructuring actions
|
45
|
77
|
||||||
2005
restructuring actions
|
65
|
219
|
||||||
2006
restructuring actions
|
-
|
205
|
||||||
Total
|
$ |
110
|
$ |
1,873
|
||||
Fixed
Asset Reserves:
|
||||||||
2003
restructuring
actions
|
$ |
-
|
$ |
114
|
||||
2005
restructuring
actions
|
38
|
131
|
||||||
Total
|
$ |
38
|
$ |
245
|
Balance
|
Utilized
|
Foreign
Currency
|
Balance
|
|||||||||||||||||||||
7/2/07
|
Reversals
|
Cash
|
Non-Cash
|
Changes
|
9/30/07
|
|||||||||||||||||||
(In
thousands)
|
||||||||||||||||||||||||
2006
Restructuring Actions:
|
||||||||||||||||||||||||
Lease
termination costs (a)
|
$ |
6
|
$ |
-
|
$ | (6 | ) | $ |
–
|
$ |
-
|
$ |
-
|
|||||||||||
Miscellaneous
liabilities (a)
|
12
|
(12 | ) |
-
|
-
|
–
|
-
|
|||||||||||||||||
$ |
18
|
$ | (12 | ) | $ | (6 | ) | $ |
-
|
$ |
-
|
$ |
-
|
|||||||||||
Balance
Sheet Breakout:
|
||||||||||||||||||||||||
Accrued
restructuring charges (a)
|
$ |
18
|
$ | (12 | ) | $ | (6 | ) | $ |
-
|
$ |
-
|
$ |
-
|
(a)
|
Amounts
represent primarily cash charges.
|
Balance
|
Utilized
|
Foreign
Currency
|
Balance
|
|||||||||||||||||||||
12/31/06
|
Reversals
|
Cash
|
Non-Cash
|
Changes
|
9/30/07
|
|||||||||||||||||||
(In
thousands)
|
||||||||||||||||||||||||
2006
Restructuring Actions:
|
||||||||||||||||||||||||
Severance
and benefits (a)
|
$ |
133
|
$ | (39 | ) | $ | (95 | ) | $ |
–
|
$ |
1
|
$ |
-
|
||||||||||
Lease
termination costs (a)
|
58
|
(19 | ) | (39 | ) |
–
|
-
|
-
|
||||||||||||||||
Miscellaneous
liabilities (a)
|
14
|
(13 | ) | (1 | ) |
-
|
–
|
-
|
||||||||||||||||
$ |
205
|
$ | (71 | ) | $ | (135 | ) | $ |
-
|
$ |
1
|
$ |
-
|
|||||||||||
Balance
Sheet Breakout:
|
||||||||||||||||||||||||
Accrued
restructuring charges (a)
|
$ |
205
|
$ | (71 | ) | $ | (135 | ) | $ |
-
|
$ |
1
|
$ |
-
|
(a)
|
Amounts
represent primarily cash charges.
|
Balance
|
Net
Utilized
|
Balance
|
||||||||||||||||||
7/2/07
|
Reversals
|
Cash
|
Non-Cash
|
9/30/07
|
||||||||||||||||
(In
thousands)
|
||||||||||||||||||||
2005
Restructuring Actions:
|
||||||||||||||||||||
Lease
termination costs (a)
|
$ |
84
|
$ | (66 | ) | $ |
47
|
$ |
–
|
$ |
65
|
|||||||||
Lease
related assets (b)
|
64
|
–
|
–
|
(26 | ) |
38
|
||||||||||||||
$ |
148
|
$ | (66 | ) | $ |
47
|
$ | (26 | ) | $ |
103
|
|||||||||
Balance
Sheet Breakout:
|
||||||||||||||||||||
Accrued
restructuring charges (a)
|
$ |
84
|
$ | (66 | ) | $ |
47
|
$ |
–
|
$ |
65
|
|||||||||
Fixed
asset reserves (b)
|
64
|
–
|
–
|
(26 | ) |
38
|
||||||||||||||
$ |
148
|
$ | (66 | ) | $ |
47
|
$ | (26 | ) | $ |
103
|
(a)
|
Amounts
represent primarily cash charges.
|
Balance
|
Utilized
|
Balance
|
||||||||||||||||||
12/31/06
|
Reversals
|
Cash
|
Non-Cash
|
9/30/07
|
||||||||||||||||
(In
thousands)
|
||||||||||||||||||||
2005
Restructuring Actions:
|
||||||||||||||||||||
Lease
termination costs (a)
|
$ |
219
|
$ | (147 | ) | $ | (7 | ) | $ |
–
|
$ |
65
|
||||||||
Lease
related assets (b)
|
131
|
–
|
–
|
(93 | ) |
38
|
||||||||||||||
$ |
350
|
$ | (147 | ) | $ | 7 | ) | $ | (93 | ) | $ |
103
|
||||||||
Balance
Sheet Breakout:
|
||||||||||||||||||||
Accrued
restructuring charges (a)
|
$ |
219
|
$ | (147 | ) | $ | (7 | ) | $ |
–
|
$ |
65
|
||||||||
Fixed
asset reserves (b)
|
131
|
–
|
–
|
(93 | ) |
38
|
||||||||||||||
$ |
350
|
$ | (147 | ) | $ | (7 | ) | $ | (93 | ) | $ |
103
|
(a)
|
Amounts
represent primarily cash charges.
|
Balance
|
Net
Utilized
|
Balance
|
||||||||||||||||||||||
7/2/07
|
Additions
|
Reversals
|
Cash
|
Non-Cash
|
9/30/07
|
|||||||||||||||||||
(In
thousands)
|
||||||||||||||||||||||||
2004
Restructuring Actions:
|
||||||||||||||||||||||||
Lease
termination costs (a)
|
$ |
111
|
$ |
-
|
$ | (75 | ) | $ |
9
|
$ |
–
|
$ |
45
|
|||||||||||
Balance
Sheet Breakout:
|
||||||||||||||||||||||||
Accrued
restructuring charges (a)
|
$ |
111
|
$ |
-
|
$ | (75 | ) | $ |
9
|
$ |
–
|
$ |
45
|
(a)
|
Amounts
represent cash charges.
|
Balance
|
Utilized
|
Balance
|
||||||||||||||||||||||
12/31/07
|
Additions
|
Reversals
|
Cash
|
Non-Cash
|
9/30/07
|
|||||||||||||||||||
(In
thousands)
|
||||||||||||||||||||||||
2004
Restructuring Actions:
|
||||||||||||||||||||||||
Lease
termination costs (a)
|
$ |
77
|
$ |
81
|
$ | (81 | ) | $ | (32 | ) | $ |
–
|
$ |
45
|
||||||||||
Balance
Sheet Breakout:
|
||||||||||||||||||||||||
Accrued
restructuring charges (a)
|
$ |
77
|
$ |
81
|
$ | (81 | ) | $ | (32 | ) | $ |
–
|
$ |
45
|
(a)
|
Amounts
represent cash charges.
|
Weighted
|
||||||||
Shares
|
Average
|
|||||||
(000’s | ) |
Exercise
Price
|
||||||
Outstanding
at beginning of year
|
3,060
|
$ |
3.90
|
|||||
Granted
|
166
|
4.18
|
||||||
Exercised
|
(31 | ) |
3.28
|
|||||
Forfeited
/ Cancelled / Expired
|
(124 | ) |
4.50
|
|||||
Outstanding
at September 30, 2007
|
3,071
|
3.90
|
||||||
Options
exercisable at September 30, 2007
|
1,305
|
4.96
|
Sept.
30,
2007
|
Dec.
31,
2006
|
|||||||
(In
thousands)
|
||||||||
Other
Intangible Assets:
|
||||||||
Gross
value
|
$ |
1,127
|
$ |
1,127
|
||||
Accumulated
amortization
|
(236 | ) | (84 | ) | ||||
Net
intangible
assets
|
$ |
891
|
$ |
1,043
|
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS:
|
For
the Three Months Ended
|
||||||||||||||||
Sept.
30,
|
Oct.
1,
|
|||||||||||||||
2007
|
2006
|
$
Change
|
%
Change
|
|||||||||||||
(In
thousands, except %)
|
||||||||||||||||
Sales:
|
||||||||||||||||
Consumer
Products:
|
||||||||||||||||
Consumer
Storage
Solutions
|
$ |
60,685
|
$ |
30,317
|
$ |
30,368
|
100 | % | ||||||||
Zip
Products
|
3,816
|
6,245
|
(2,429 | ) | (39 | ) | ||||||||||
Total
Consumer
Products
|
64,501
|
36,562
|
27,939
|
76
|
||||||||||||
Business
Products:
|
||||||||||||||||
REV
Products
|
8,981
|
11,201
|
(2,220 | ) | (20 | ) | ||||||||||
Network
Storage
Systems
|
5,523
|
4,473
|
1,050
|
23
|
||||||||||||
Services
|
1,653
|
1,254
|
399
|
32
|
||||||||||||
Total
Business
Products
|
16,157
|
16,928
|
(771 | ) | (5 | ) | ||||||||||
Other
Products
|
9
|
105
|
(96 | ) | (91 | ) | ||||||||||
Total
Sales
|
$ |
80,667
|
$ |
53,595
|
$ |
27,072
|
51 | % |
For
the Three Months Ended
|
||||||||||||||||
Sept.
30,
|
Oct.
1,
|
|||||||||||||||
2007
|
2006
|
$
Change
|
%
Change
|
|||||||||||||
(In
thousands, except %)
|
||||||||||||||||
Sales
Dollars:
|
||||||||||||||||
Europe
|
$ |
53,072
|
$ |
26,697
|
$ |
26,375
|
99 | % | ||||||||
Americas
(includes Latin America)
|
25,500
|
24,282
|
1,218
|
5
|
||||||||||||
Asia
Pacific
|
2,095
|
2,616
|
(521 | ) | (20 | ) | ||||||||||
Total
|
$ |
80,667
|
$ |
53,595
|
$ |
27,072
|
51 | % | ||||||||
Percent
of Total Sales:
|
||||||||||||||||
Europe
|
66 | % | 50 | % | ||||||||||||
Americas
(includes Latin America)
|
32
|
45
|
||||||||||||||
Asia
Pacific
|
2
|
5
|
||||||||||||||
Total
|
100 | % | 100 | % |
For
the Nine Months Ended
|
||||||||||||||||
Sept.
30,
|
Oct.
1,
|
|||||||||||||||
2007
|
2006
|
$
Change
|
%
Change
|
|||||||||||||
(In
thousands, except %)
|
||||||||||||||||
Sales:
|
||||||||||||||||
Consumer
Products:
|
||||||||||||||||
Consumer
Storage
Solutions
|
$ |
153,262
|
$ |
81,999
|
$ |
71,263
|
87 | % | ||||||||
Zip
Products
|
13,097
|
25,681
|
(12,584 | ) | (49 | ) | ||||||||||
Total
Consumer
Products
|
166,359
|
107,680
|
58,679
|
54
|
||||||||||||
Business
Products:
|
||||||||||||||||
REV
Products
|
29,388
|
30,869
|
(1,481 | ) | (5 | ) | ||||||||||
Network
Storage
Systems
|
15,077
|
12,724
|
2,353
|
18
|
||||||||||||
Services
|
4,898
|
1,515
|
3,383
|
223
|
||||||||||||
Total
Business
Products
|
49,363
|
45,108
|
4,255
|
9
|
||||||||||||
Other
Products
|
248
|
540
|
(292 | ) | (54 | ) | ||||||||||
Total
Sales
|
$ |
215,970
|
$ |
153,328
|
$ |
62,642
|
41 | % |
For
the Nine Months Ended
|
||||||||||||||||
Sept.
30,
|
Oct.
1,
|
|||||||||||||||
2007
|
2006
|
$
Change
|
%
Change
|
|||||||||||||
(In
thousands, except %)
|
||||||||||||||||
Sales
Dollars:
|
||||||||||||||||
Europe
|
$ |
142,874
|
$ |
75,713
|
$ |
67,161
|
89 | % | ||||||||
Americas
(includes Latin America)
|
65,609
|
68,329
|
(2,720 | ) | (4 | ) | ||||||||||
Asia
Pacific
|
7,487
|
9,286
|
(1,799 | ) | (19 | ) | ||||||||||
Total
|
$ |
215,970
|
$ |
153,328
|
$ |
62,642
|
41 | % | ||||||||
Percent
of Total Sales:
|
||||||||||||||||
Europe
|
66 | % | 49 | % | ||||||||||||
Americas
(includes Latin America)
|
30
|
45
|
||||||||||||||
Asia
Pacific
|
4
|
6
|
||||||||||||||
Total
|
100 | % | 100 | % |
For
the Three Months Ended
|
||||||||||||||||
Sept.
30,
|
Oct.
1,
|
|||||||||||||||
2007
|
2006
|
$
Change
|
%
Change
|
|||||||||||||
(In
thousands, except %)
|
||||||||||||||||
Total
Gross Margin (dollars)
|
$ |
12,953
|
$ |
12,216
|
$ |
737
|
6 | % | ||||||||
Total
Gross Margin (%)
|
16.1 | % | 22.8 | % |
For
the Nine Months Ended
|
||||||||||||||||
Sept.
30,
|
Oct.
1,
|
|||||||||||||||
2007
|
2006
|
$
Change
|
%
Change
|
|||||||||||||
(In
thousands, except %)
|
||||||||||||||||
Total
Gross Margin (dollars)
|
$ |
39,395
|
$ |
30,810
|
$ |
8,585
|
28 | % | ||||||||
Total
Gross Margin (%)
|
18.2 | % | 20.1 | % |
For
the Three Months Ended
|
||||||||||||||||
Sept.
30,
|
Oct.
1,
|
|||||||||||||||
2007
|
2006
|
$
Change
|
%
Change
|
|||||||||||||
(In
thousands, except %)
|
||||||||||||||||
Product
Operating Income (Loss):
|
||||||||||||||||
Consumer
Products:
|
||||||||||||||||
Consumer
Storage
Solutions
|
$ | (545 | ) | $ | (1,744 | ) | $ |
1,199
|
69 | % | ||||||
Zip
Products
|
1,224
|
767
|
457
|
60
|
||||||||||||
Total
Consumer
Products
|
679
|
(977 | ) |
1,656
|
169
|
|||||||||||
Business
Products:
|
||||||||||||||||
REV
Products
|
204
|
(367 | ) |
571
|
156
|
|||||||||||
Network
Storage
Systems
|
566
|
464
|
102
|
22
|
||||||||||||
Services
|
(349 | ) | (53 | ) | (296 | ) | (558 | ) | ||||||||
Total
Business
Products
|
421
|
44
|
377
|
857
|
||||||||||||
Other
Products
|
(139 | ) |
75
|
(214 | ) | (285 | ) | |||||||||
Restructuring
reversals
|
153
|
211
|
(58 | ) | (27 | ) | ||||||||||
Total
Operating Income
(Loss)
|
$ |
1,114
|
$ | (647 | ) | $ |
1,761
|
272 | % | |||||||
For
the Nine Months Ended
|
||||||||||||||||
Sept.
30,
|
Oct.
1,
|
|||||||||||||||
2007
|
2006
|
$
Change
|
%
Change
|
|||||||||||||
(In
thousands, except %)
|
||||||||||||||||
Product
Operating Income (Loss):
|
||||||||||||||||
Consumer
Products:
|
||||||||||||||||
Consumer
Storage
Solutions
|
$ | (141 | ) | $ | (11,666 | ) | $ |
11,525
|
99 | % | ||||||
Zip
Products
|
1,804
|
1,874
|
(70 | ) | (4 | ) | ||||||||||
Total
Consumer
Products
|
1,663
|
(9,792 | ) |
11,455
|
117
|
|||||||||||
Business
Products:
|
||||||||||||||||
REV
Products
|
234
|
(5,742 | ) |
5,976
|
104
|
|||||||||||
Network
Storage
Systems
|
211
|
884
|
(673 | ) | (76 | ) | ||||||||||
Services
|
(1,404 | ) |
174
|
(1,578 | ) | (907 | ) | |||||||||
Total
Business
Products
|
(959 | ) | (4,684 | ) |
3,725
|
80
|
||||||||||
Other
Products
|
250
|
1,011
|
(761 | ) | (75 | ) | ||||||||||
Non-Restructuring
Charges
|
-
|
(995 | ) |
995
|
100
|
|||||||||||
Restructuring
(charges) reversals
|
235
|
(4,358 | ) |
4,593
|
105
|
|||||||||||
Total
Operating Income
(Loss)
|
$ |
1,189
|
$ | (18,818 | ) | $ |
20,007
|
106 | % |
For
the Three Months Ended
|
||||||||||||||||
Sept.
30,
|
Oct.
1,
|
|||||||||||||||
2007
|
2006
|
$
Change
|
%
Change
|
|||||||||||||
(In
thousands, except %)
|
||||||||||||||||
Operating
Expenses:
|
||||||||||||||||
Selling,
general and
administrative
|
$ |
9,452
|
$ |
8,216
|
$ |
1,236
|
15 | % | ||||||||
Research
and
development
|
1,872
|
1,904
|
(32 | ) | (2 | ) | ||||||||||
Restructuring
reversals
|
(153 | ) | (211 | ) |
58
|
27
|
||||||||||
Goodwill
impairment
charge
|
-
|
2,513
|
(2,513 | ) | (100 | ) | ||||||||||
Bad
debt
expense
|
668
|
441
|
227
|
51
|
||||||||||||
Total
Operating
Expenses
|
$ |
11,839
|
$ |
12,863
|
$ | (1,024 | ) | (8 | )% |
For
the Nine Months Ended
|
||||||||||||||||
Sept.
30,
|
Oct.
1,
|
|||||||||||||||
2007
|
2006
|
$
Change
|
%
Change
|
|||||||||||||
(In
thousands, except %)
|
||||||||||||||||
Operating
Expenses:
|
||||||||||||||||
Selling,
general and
administrative
|
$ |
30,233
|
$ |
31,308
|
$ | (1,075 | ) | (3 | )% | |||||||
Research
and
development
|
5,395
|
6,946
|
(1,551 | ) | (22 | ) | ||||||||||
Restructuring
charges
(reversals)
|
(235 | ) |
4,358
|
(4,593 | ) | (105 | ) | |||||||||
Goodwill
impairment
charges
|
2,963
|
7,935
|
(4,972 | ) | (63 | ) | ||||||||||
License
and patent fee
income
|
(452 | ) | (1,085 | ) |
633
|
58
|
||||||||||
Bad
debt
expense
|
302
|
166
|
136
|
82
|
||||||||||||
Total
Operating
Expenses
|
$ |
38,206
|
$ |
49,628
|
$ | (11,422 | ) | (23 | )% |
Sept.
30,
|
Dec.
31,
|
|||||||||||||||
2007
|
2006
|
$
Change
|
%
Change
|
|||||||||||||
(In
thousands, except %)
|
||||||||||||||||
Total
cash, cash equivalents and temporary
investments
for the U.S.
entity
|
$ |
4,604
|
$ |
2,653
|
$ |
1,951
|
74 | % | ||||||||
Total
cash, cash equivalents and temporaryinvestments for non-U.S. entities
(1)
|
64,763
|
65,495
|
(732 | ) | (1 | ) | ||||||||||
Total
consolidated cash, cash equivalentsand temporary
investments
|
$ |
69,367
|
$ |
68,148
|
$ |
1,219
|
2
|
|||||||||
Working
capital
|
$ |
90,135
|
$ |
79,273
|
$ |
10,689
|
13 | % |
(1)
|
Of
the $64.8 million in total cash, cash equivalents and temporary
investments for non-U.S. entities, $0.1 million was restricted at
September 30, 2007. At December 31, 2006, $0.1 million of the
non-U.S. entity cash was
restricted.
|
·
|
Our
ability to improve and/or sustain satisfactory HDD gross
margins;
|
·
|
Our
ability to generate significant sales and profit margins from REV®
and NAS
products and OfficeScreen®
services;
|
·
|
Our
ability to replace declining Zip®
revenues and
profits with revenues and profits from other products and
services;
|
·
|
Worldwide
market conditions and demand for digital storage
products;
|
·
|
Our
success in meeting targeted availability dates for new and enhanced
products;
|
·
|
Our
ability to develop and commercialize new intellectual property and
to
protect existing intellectual
property;
|
·
|
Our
ability to maintain profitable relationships with our distributors,
retailers and other resellers;
|
·
|
Our
ability to maintain an appropriate cost
structure;
|
·
|
Our
ability to attract and retain competent, motivated
employees;
|
·
|
Our
ability to comply with applicable legal requirements throughout the
world;
|
·
|
Our
ability to avoid disruptions to our ongoing business as we evaluate
strategic investments, including the evaluation of new opportunities
related to services for small- and medium-sized
businesses;
|
·
|
Our
ability to obtain HDD products from suppliers at a competitive price
and
in sufficient quantities;
|
·
|
Our
ability to utilize reliable outsource partners for certain critical
functions at prices that keep us competitive
and
|
·
|
Our
ability to successfully manage litigation, including enforcing our
rights,
protecting our interests and defending claims made against
us.
|
·
|
Inability
to create product awareness or lack of market acceptance of the REV
70GB
Backup Drive;
|
·
|
Failure
to maintain acceptable arrangements with product component suppliers,
particularly in light of lower than anticipated
volumes;
|
·
|
Manufacturing,
technical, supplier, or quality-related delays, issues or concerns,
including the loss of any key supplier or failure of any key supplier
to
deliver high quality products on
time;
|
·
|
The
potential for further delays or other failures of our OEM partner
in the
broadcast industry, Thomson N.A., to introduce expected
products utilizing REV drives and disks in
2007;
|
·
|
Potential
declines in demand for REV 35GB products because of the launch of
REV 70GB
products;
|
·
|
The
potential for cost overruns, schedule misses or performance issues
with
next generation REV products as we develop additional REV products
and
|
·
|
Risks
that third parties may assert intellectual property claims against
REV
products.
|
Vice
President of Finance and
|