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Imation Reports Second Quarter And First Half 2013 Financial Results

Description of Tables

Table One - Consolidated Statements of OperationsTable Two - Consolidated Balance SheetsTable Three - Supplemental Segment and Product InformationTable Four - Additional InformationTable Five - Non-GAAP Financial MeasuresTable Six - Non-GAAP Financial Measures

Non-GAAP Financial Measures

The non-GAAP financial measurements (adjusted gross margin, adjusted operating income (loss), adjusted earnings (loss) per diluted share) are provided to assist in understanding the impact of certain items on Imation's actual results of operations when compared with prior periods (see Tables Five and Six). Management believes this will assist investors in making an evaluation of Imation's performance against prior periods on a comparable basis by adjusting for these items. Management understands that there are material limitations on the use of non-GAAP measures. Non-GAAP measures are not substitutes for GAAP measures for the purpose of analyzing financial performance. These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. This information should not be construed as an alternative to the reported results, which have been determined in accordance with accounting principles generally accepted in the United States of America.

About Imation Corp.

Imation (NYSE: IMN) is a global data storage and information security company. Our products and solutions help organizations and individuals store, manage and protect their digital content. Imation’s storage and security portfolio includes Nexsan high-density, archive and solid-state optimized unified hybrid storage solutions; IronKey mobile security solutions, that address the needs of professionals for secure data transport and mobile workspaces; and consumer storage solutions, audio products and accessories sold under the Imation, Memorex and TDK Life on Record brands. Imation reaches customers in more than 100 countries through a powerful global distribution network. For more information, visit  www.imation.com.

Risk and Uncertainties

Certain information contained in this press release which does not relate to historical financial information may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause our actual results in the future to differ materially from our historical results and those presently anticipated or projected. We wish to caution investors not to place undue reliance on any such forward-looking statements. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements to reflect events or circumstances arising after such date. Risk factors include our ability to successfully implement our strategy including our global restructuring plan; our ability to grow our business in new products with profitable margins and the rate of revenue decline for certain existing products; the ability to quickly develop, source, introduce and deliver differentiated and innovative products; our potential dependence on third parties for new product introductions or technologies in order to introduce our own new products; foreign currency fluctuations; the ready availability and price of energy and key raw materials or critical components including the effects of natural disasters and our ability to pass along raw materials price increases to our customers; continuing uncertainty in global and regional economic conditions; our ability to identify, value, integrate and realize the expected benefits from any acquisition which has occurred or may occur in connection with our strategy; the possibility that our goodwill and intangible assets or any goodwill or intangible assets that we acquire may become impaired; the ability of our security products to withstand cyber-attacks; the seasonality and volatility of the markets in which we operate; changes in European law or practice related to the imposition or collectability of optical levies; significant changes in discount rates and other assumptions used in the valuation of our pension plans; changes in tax laws, regulations and results of inspections by various tax authorities; our ability to successfully defend our intellectual property rights and the ability or willingness of our suppliers to provide adequate protection against third party intellectual property or product liability claims; the outcome of any pending or future litigation; ability to access financing to achieve strategic objectives and growth due to changes in the capital and credit markets; limitations in our operations that could arise from compliance with the debt covenants in our credit facility; increased compliance with changing laws and regulations potentially affecting our operating results; failure to adequately protect our information systems from cyber-attacks; our ability to meet our revenue growth, gross margin and earnings targets and the volatility of our stock price due to our results or market trends, as well as various factors set forth from time to time in our filings with the Securities and Exchange Commission.
 
Table One
 
IMATION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except for per share amounts)
(Unaudited)
    Three Months Ended     Six Months Ended
June 30 June 30
2013     2012 2013     2012
Net revenue $ 211.7 $ 249.2 $ 436.1 $ 512.5
Cost of goods sold   156.5     199.6     338.8     409.3  
Gross profit 55.2 49.6 97.3 103.2
 
Operating expense:
Selling, general and administrative 46.5 47.3 95.8 99.6
Research and development 4.3 5.5 9.7 11.1
Restructuring and other   4.4     4.3     6.5     5.6  
Total 55.2 57.1 112.0 116.3
 
Operating income (loss) from continuing operations - (7.5 ) (14.7 ) (13.1 )
 
Other expense (income):
Interest income - (0.2 ) - (0.3 )
Interest expense 0.6 0.9 1.3 1.8
Other, net   0.1     1.1     (0.1 )   2.6  
Total 0.7 1.8 1.2 4.1
 
Loss from continuing operations before income taxes (0.7 ) (9.3 ) (15.9 ) (17.2 )
 
Income tax provision   1.1     0.2     1.5     1.5  
 
Loss from continuing operations (1.8 ) (9.5 ) (17.4 ) (18.7 )
 
Discontinued operations:
Loss from operations of discontinued businesses, net of income taxes   (3.3 )   (2.5 )   (8.8 )   (5.5 )
 
Net loss $ (5.1 ) $ (12.0 ) $ (26.2 ) $ (24.2 )
 
Loss per common share - basic:
Continuing operations $ (0.04 ) $ (0.25 ) $ (0.43 ) $ (0.50 )
Discontinued operations (0.08 ) (0.07 ) (0.22 ) (0.15 )
Net loss (0.13 ) (0.32 ) (0.65 ) (0.64 )
 
Loss per common share - diluted:
Continuing operations $ (0.04 ) $ (0.25 ) $ (0.43 ) $ (0.50 )
Discontinued operations (0.08 ) (0.07 ) (0.22 ) (0.15 )
Net loss (0.13 ) (0.32 ) (0.65 ) (0.64 )
 
Weighted average shares outstanding
Basic 40.5 37.7 40.5 37.6
Diluted 40.5 37.7 40.5 37.6
 

 
Table Two
 
IMATION CORP.
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
       
June 30, December 31,
2013 2012
ASSETS
Current assets
Cash and cash equivalents $ 94.4 $ 108.7
Accounts receivable, net 158.0 220.8
Inventories 124.9 166.0
Other current assets   82.1   61.6
 
Total current assets 459.4 557.1
 
Property, plant and equipment, net 54.2 58.9
Intangible assets, net 73.0 81.9
Goodwill 70.4 73.5
Other assets   22.3   22.1
 
Total assets $ 679.3 $ 793.5
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 120.5 $ 162.7
Short-term debt 20.0 20.0
Other current liabilities   120.3   158.4
 
Total current liabilities 260.8 341.1
 
Other liabilities 47.8 52.0
       
Total liabilities   308.6   393.1
Commitments and contingencies        
Shareholders' equity   370.7   400.4
 
Total liabilities and shareholders' equity $ 679.3 $ 793.5
 

 
Table Three
 
IMATION CORP.
SUPPLEMENTAL SEGMENT AND PRODUCT INFORMATION
(Dollars in millions)
(Unaudited)
               
 
Three months ended Three months ended
June 30, June 30,
2013 2012 % Change
Revenue % Total Revenue % Total
Consumer Storage and Accessories
Consumer storage media $ 107.3 50.7 % $ 151.1 60.6 % -29.0 %
Audio and accessories   9.6   4.5 %   9.4   3.8 % 2.1 %
Total Consumer Storage and Accessories 116.9   55.2 %   160.5   64.4 % -27.2 %
Tiered Storage and Security Solutions
Commercial storage media 61.8 29.2 % 75.1 30.1 % -17.7 %
Storage and security solutions   33.0   15.6 %   13.6   5.5 % 142.6 %
Total Tiered Storage and Security Solutions 94.8   44.8 %   88.7   35.6 % 6.9 %
Total $ 211.7   100.0 % $ 249.2   100.0 %
 

 

 

Operating

Operating

Income (Loss)
OI %

Income (Loss)
OI %
Consumer Storage and Accessories $ 20.8 17.8 % $ 16.0 10.0 % 30.0 %
Tiered Storage and Security Solutions (2.9 ) -3.1 % (6.0 ) -6.8 % -51.7 %
Corp/Unallocated (1)   (17.9 ) NM     (17.5 ) NM   2.3 %
Total operating income (loss) from continuing operations $ 0.0   0.0 % $ (7.5 ) -3.0 %
 
Gross Margin Gross Margin
 
Consumer Storage and Accessories 30.2 % 20.1 %
Tiered Storage and Security Solutions   21.7     19.6  
26.4 19.9
Inventory write-offs related to restructuring programs   (0.3 )   0.0  
Total   26.1   %   19.9   %
 
Six months ended Six months ended
June 30, June 30,
2013 2012 % Change
Revenue % Total Revenue % Total
Consumer Storage and Accessories
Consumer storage media $ 221.5 50.8 % $ 303.8 59.3 % -27.1 %
Audio and accessories   17.2   3.9 %   18.8   3.6 % -8.5 %
Total Consumer Storage and Accessories 238.7   54.7 %   322.6   62.9 % -26.0 %
Tiered Storage and Security Solutions
Commercial storage media 128.7 29.5 % 161.3 31.5 % -20.2 %
Storage and security solutions   68.7   15.8 %   28.6   5.6 % 140.2 %
Total Tiered Storage and Security Solutions 197.4   45.3 %   189.9   37.1 % 3.9 %
Total $ 436.1   100.0 % $ 512.5   100.0 %
 
 

Operating

 

Operating

 

Income (Loss)

 

OI %

Income (Loss)

OI %
Consumer Storage and Accessories $ 26.7 11.2 % $ 32.6 10.1 % -18.1 %
Tiered Storage and Security Solutions (5.9 ) -3.0 % (12.5 ) -6.6 % -52.8 %
Corp/Unallocated (1)   (35.5 ) NM     (33.2 ) NM   6.9 %
Total operating loss from continuing operations $ (14.7 ) -3.4 % $ (13.1 ) -2.6 %
 
Gross Margin Gross Margin
 
Consumer Storage and Accessories 23.8 % 20.5 %
Tiered Storage and Security Solutions   21.9     19.5  
23.0 20.1
Inventory write-offs related to restructuring programs   (0.6 )   0.0  
Total   22.3   %   20.1   %
 
NM - Not Meaningful
 

(1) Corporate and unallocated amounts include depreciation and amortization expense, litigation settlement expense, goodwill impairment, intangible impairments, intangible asset abandonment, corporate expense, contingent consideration adjustments, inventory write-offs related to our restructuring programs and restructuring and other expenses which are not allocated to the segments. We believe the presentation of these items in Corporate and unallocated avoids distorting the operating income for our segments.

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