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Imation Reports Q1 2007 Revenue of $421.9 Million, up 25.9%
Diluted EPS of $0.44 on Operating Income of $23.6 Million
OAKDALE, Minn., April 19 /PRNewswire-FirstCall/ -- Imation Corp. (
IMN) today released financial results for the quarter ended March 31, 2007.
Highlights for Q1 include the following:
-- Revenue of $421.9 million was up 25.9 percent compared with Q1 2006
revenue of $335.2 million. Growth was driven by optical and flash
products primarily due to the addition of Memorex brand revenue.
-- Operating income of $23.6 million and diluted earnings per share of
$0.44 compared with $29.3 million of operating income and diluted EPS
of $0.55 in Q1 2006.
-- Both revenue and earnings in the quarter were negatively impacted by
two factors which affected the entire industry. Flash products
experienced industry-wide price erosion primarily in the US early in
the quarter due to excess capacity of NAND flash. This reduced
operating income by $4.5 million due to lower than expected margins.
The industry also experienced pricing pressure on LTO tape media due to
continued delay of the introduction of LTO 4 drives.
-- While both of these issues were significant factors in the quarter, we
believe flash pricing has stabilized and we expect shipment of LTO 4
drives to begin in the second quarter.
Frank Russomanno, Chief Executive Officer and President of Imation,
said: "While the industry-wide issues affected our first quarter results,
the Company had several positive developments that provide increased
momentum for the rest of the year. We recently announced the Sun/STK
distribution agreement and are working on additional distribution
agreements which continue to build our presence and our total market
coverage. We are now seeing solid growth in the T10000 market and expect it
will continue to ramp up throughout 2007. We are well positioned with LTO 4
media availability and look forward to the opportunity to start selling
this product later this quarter."
"With today's announcement of the acquisition of TDK's recording media
business, Imation has become a leading global product and brand management
company in recordable media. As a result of the acquisition, Imation is
building a very balanced portfolio of business-to-business and consumer
brands. Our objective is to grow these brands through strong marketing,
brand asset management and disciplined global product positioning. The
timing of the close of the TDK recording media business acquisition will be
an important factor in our 2007 outlook and we plan on updating our outlook
on May 22nd, when we communicate our vision and strategy," Russomanno
concluded.
Imation made two additional announcements today (see: Imation and TDK
Agree to Imation's Acquisition of TDK Brand Recording Media Business for
$300 Million in Stock and Cash, PR Newswire: April 19, 2007 and Imation
Board Authorizes Repurchase of up to 5 Million shares of Common Stock: PR
Newswire: April 19, 2007).
A teleconference is scheduled for 9:00 a.m. CT today, April 19, 2007.
The call-in number is 866-256-9239 (see Webcast and Replay Information at
the bottom of this release).
First Quarter 2007 and 2006 Financial Highlights
(Dollars in millions, except per
share amounts) Q1 07 Q1 06 % Change
-------------------------------------- ------ ------ -------------
Net Revenue $421.9 $335.2 25.9%
Gross Profit $ 81.8 $ 79.2 3.3%
% of Revenue 19.4 % 23.6 %
SG&A $ 45.2 $ 35.3 28.0%
% of Revenue 10.7 % 10.5 %
R&D $ 12.4 $ 12.8 -3.1%
% of Revenue 2.9 % 3.8 %
Restructuring and Other $0.6 $ 1.8 -66.7%
Operating Income $ 23.6 $ 29.3 -19.5%
% of Revenue 5.6 % 8.7 %
Net Income $ 15.7 $ 19.4 -19.1%
Diluted Earnings per Share $ 0.44 $ 0.55 -20.0%
Operating Cash Flows $ 6.2 $ 23.1 -73.2%
Net Revenue was $421.9 million, up 25.9 percent from Q1 2006 driven by
the Memorex acquisition. Revenue in the Americas segment, which represented
51 percent of total revenue, was up approximately 50 percent from the
comparable period a year ago driven by the Memorex acquisition. Revenue
from the European segment increased approximately 11 percent also driven by
Memorex and represented approximately 34 percent of total revenue in the
quarter. We also saw slight growth in the Asia Pacific segment which
represented approximately 15 percent of total revenue in the quarter.
Excluding the Memorex revenue, overall price erosion was 10 percent driven
by flash products. Revenue growth was also impacted by lower than expected
revenues from our Global Data Media joint venture.
Gross Margin of 19.4 percent was down from 23.6 percent in Q1 2006 and
from 20.1 percent in Q4 2006 due to shifts in product mix as anticipated
and price declines as discussed earlier. While market factors negatively
impacted our gross margin in the quarter, we partially offset these impacts
with positive benefits from our lean programs and manufacturing
performance.
Selling, General & Administrative (SG&A) spending was $45.2 million or
10.7 percent of revenue, compared with $35.3 million or 10.5 percent of
revenue in Q1 2006. The increase in total expense was due to the addition
of Memorex SG&A expense and intangible asset amortization, partially offset
by synergies achieved with the Memorex acquisition as well as spending
declines elsewhere.
Research & Development (R&D) spending of $12.4 million or 2.9 percent
of revenue compared with $12.8 million or 3.8 percent of revenue reported
in Q1 2006.
Operating Income was $23.6 million, compared with operating income of
$29.3 million reported in Q1 2006. Operating income included restructuring
and other expense of $0.6 million compared with $1.8 million in Q1 2006.
The decrease in operating income is primarily due to the decrease in gross
margin discussed above.
Other Income/Expense and Taxes: Other income of $1.5 million in Q1 2007
compared with $1.4 million in Q1 2006. The effective tax rate in Q1 2007
was 37.5 percent compared with 36.8 percent in Q1 2006.
Diluted Earnings per Share was $0.44 for Q1 2007 compared with $0.55
diluted EPS in Q1 2006.
Cash Flow, Working Capital and Balance Sheet: Cash flow generated from
operations totaled $6.2 million in Q1 2007 compared with $23.1 million in
Q1 2006. The lower cash flow from operations was primarily due to lower net
income and timing of payments for other assets and liabilities. Cash from
investing activities in Q1 2007 included $7.9 million related to working
capital adjustments associated with the Memorex acquisition. Capital
spending was $5.4 million for the quarter and depreciation and amortization
was $10.5 million. Dividends of $4.9 million were paid in Q1 2007.
2007 Business Outlook
The company has not updated its 2007 business outlook with this release
due to the pending TDK recording media business acquisition, but intends to
do so on May 22nd.
Webcast and Replay Information
A live webcast of Imation Corp.'s first quarter teleconference will be
available on the Internet on a listen-only basis at http://ir.Imation.com
or http://www.streetevents.com. A taped replay of the teleconference will
be available beginning at 1:00 PM Central Daylight Time on April 19, 2007
until 5:00 PM Central Daylight Time on April 24, 2007 by dialing
866-837-8032 (access code 1054649). All remarks made during the
teleconference will be current at the time of the call and the replay will
not be updated to reflect any subsequent developments.
About Imation Corp.
Imation Corp. is the only company in the world solely focused on the
development, manufacture and supply of removable data storage products
spanning the four pillars of magnetic, optical, flash and removable hard
disk storage. With more than 50 years of data storage leadership beginning
with the development of the world's first computer tape, Imation proudly
marked its tenth anniversary as an independent company during 2006. In
addition to the Imation brand, Imation Corp.'s global brand portfolio
includes the Memorex brand, one of the most widely recognized names in the
consumer electronics industry, famous for the slogan, "Is it live or is it
Memorex?". Additional information about Imation is available at
http://www.imation.com or by calling 1-888-466-3456. Imation, the Imation
logo, Memorex, and "Is it live or is it Memorex?" are trademarks of Imation
Corp. and its subsidiaries. All other trademarks are the property of their
respective owners.
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 close the acquisition of the TDK recording media business and
achieve the anticipated benefits including synergies in a timely manner;
our ability to operate the Memorex product lines as an integrated entity;
our ability to successfully defend our intellectual property, including the
Memorex brand and patent licenses and the Philips patent cross license;
continuing uncertainty in global economic conditions that make it
particularly difficult to predict product demand; our ability to meet our
cost reduction and revenue growth targets; our ability to introduce new
offerings in a timely manner either independently or in association with
OEMs or other third parties; our ability to achieve the expected benefits
from the Moser Baer and other strategic relationships and distribution
agreements such as the GDM joint venture and Tandberg relationships; the
competitive pricing environment and its possible impact on inventory
valuations; foreign currency fluctuations; the outcome of any pending or
future litigation; our ability to secure adequate supply of certain high
demand products; the ready availability and price of energy; availability
of key raw materials or critical components; the market acceptance of newly
introduced product and service offerings; the rate of decline for certain
existing products, as well as various factors set forth from time to time
in our filings with the Securities and Exchange Commission.
IMATION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except for per share amounts)
(Unaudited)
Three Months Ended
March 31,
--------------------
2007 2006
--------- --------
Net revenue $ 421.9 $ 335.2
Cost of goods sold 340.1 256.0
--------- --------
Gross profit 81.8 79.2
Operating expense:
Selling, general and administrative 45.2 35.3
Research and development 12.4 12.8
Restructuring and other 0.6 1.8
--------- --------
Total 58.2 49.9
Operating income 23.6 29.3
Other (income) and expense:
Interest income (2.5) (4.7)
Interest expense 0.3 0.2
Other, net 0.7 3.1
--------- --------
Total (1.5) (1.4)
Income before income taxes 25.1 30.7
Income tax provision 9.4 11.3
--------- --------
Net income $ 15.7 $ 19.4
========= ========
Earning per commom share:
Basic $ 0.45 $ 0.56
Diluted $ 0.44 $ 0.55
Weighted average shares outstanding:
Basic 34.9 34.7
Diluted 35.4 35.4
Cash dividends paid per share $ 0.14 $ 0.12
IMATION CORP.
CONSOLIDATED BALANCE SHEETS
(In millions)
March 31, December 31,
2007 2006
------------ -----------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 259.4 $ 252.5
Accounts receivable, net 283.2 308.1
Inventories, net 301.4 258.0
Other current assets 69.7 58.3
----------- -----------
Total current assets 913.7 876.9
Property, plant and equipment, net 176.4 178.0
Intangible assets, net 226.6 230.2
Goodwill 59.9 67.6
Other assets 30.9 30.2
----------- -----------
Total assets $ 1,407.5 $ 1,382.9
=========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Accounts payable $ 242.6 $ 227.3
Accrued payroll 12.7 23.7
Other current liabilities 131.3 140.6
----------- -----------
Total current liabilities 386.6 391.6
Other liabilities 46.1 45.0
Shareholders' equity 974.8 946.3
----------- -----------
Total liabilities and
shareholders' equity $ 1,407.5 $ 1,382.9
=========== ===========
IMATION CORP.
SUPPLEMENTAL INFORMATION
(Dollars in millions)
(Unaudited)
Segment and Product Information
Three months ended Three months ended
March 31, March 31,
2007 2006 % Change
------------------ ------------------ --------
Rev $ %Total Rev $ %Total
Americas 215.1 51.0% 143.2 42.7% 50.2%
Europe 142.7 33.8% 128.9 38.5% 10.7%
APAC 64.1 15.2% 63.1 18.8% 1.6%
------- --------- -------- --------
Total 421.9 100.0% 335.2 100.0%
======= ========= ======== ========
Rev $ %Total Rev $ %Total
Magnetic 162.4 38.5% 176.3 52.6% -7.9%
Optical 192.7 45.7% 123.8 36.9% 55.7%
Flash 35.7 8.5% 18.5 5.5% 93.0%
Other 31.1 7.3% 16.6 5.0% 87.3%
------- --------- -------- --------
Total 421.9 100.0% 335.2 100.0%
======= ========= ======== ========
Op Inc $ OI % Op Inc $ OI %
Americas 24.5 11.4% 31.5 22.0% -22.2%
Europe 11.1 7.8% 13.3 10.3% -16.5%
APAC 6.4 10.0% 5.7 9.0% 12.3%
Corp/Unallocated (1) (18.4) NM (21.2) NM NM
------- --------- -------- --------
Total 23.6 5.6% 29.3 8.7%
======= ========= ======== ========
(1) Corporate and unallocated amounts include research and
development expense, corporate expense, stock-based
compensation expense and restructuring and other expense that
are not allocated to the regional markets we serve. We believe
this avoids distorting the operating income for the regional
segments.
IMATION CORP.
SUPPLEMENTAL INFORMATION
(Dollars in millions)
(Unaudited)
Operations & Cash Flow -- Additional Information
------------------------------------------------
Three Months Ended
(Dollars in millions) March 31,
---------------------------- ------------------------------
2007 2006
-------------- -------------
Gross Profit $ 81.8 $ 79.2
Gross Margin % 19.4% 23.6%
Operating Income $ 23.6 $ 29.3
Operating Income % 5.6% 8.7%
Capital Spending $ 5.4 $ 3.3
Depreciation $ 7.0 $ 7.3
Amortization $ 3.5 $ 0.6
Tax Rate % 37.5% 36.8%
Asset Utilization Information *
-------------------------------
March 31, December 31,
2007 2006
-------------- -------------
Days Sales Outstanding (DSO) 53 56
Days of Inventory Supply 85 72
Debt to Total Capital 0.0% 0.0%
Other Information
-----------------
Approximate employee count as of March 31, 2007: 2,070
Approximate employee count as of December 31, 2006: 2,070
Book value per share as of March 31, 2007: $ 27.93
Shares used to calculate book value per
share (millions): 34.9
In the first quarter of 2007, Imation did not
repurchase any shares of its stock.
Authorization for repurchase of 2.4 million shares
remains outstanding as of March 31, 2007.
*These operational measures, which we regularly use, are provided to
assist in the investor's further understanding of our operations.
Days Sales Outstanding is calculated using the count-back method,
which calculates the number of days of most recent revenue that are
reflected in the net accounts receivable balance.
Days of Inventory Supply is calculated using the current period
inventory balance divided by the average of the inventoriable portion
of cost of goods sold for the previous 12 months expressed in days.
Debt to Total Capital is calculated by dividing total debt (long term
plus short term) by total shareholders' equity and total debt.
SOURCE Imation Corp.