News Release
| << Back |
| Imation Reports Q3 Revenue of $424.7 Million, up 42% |
 |
Diluted EPS of $0.53 OAKDALE, Minn., Oct. 24 /PRNewswire-FirstCall/ -- Imation Corp (NYSE: IMN) today released financial results for the third quarter ended September 30, 2006.
Commenting on the quarter, Chairman and CEO Bruce Henderson said: "Imation's worldwide team has delivered another strong quarter and we anticipate a solid finish to the year, enabling us to increase our revenue and earnings outlook." Frank Russomanno, EVP and Chief Operating Officer for Imation, said: "We are pleased with the third quarter results. Revenue growth of 73 percent in the Americas was driven by the Memorex acquisition as well as growth in optical, flash and LTO tape products. In Europe, our 27 percent revenue increase was driven by strong growth in optical products, particularly from our Global Data Media joint venture and Memorex. In Asia Pacific, revenues declined nine percent driven by an aggressive pricing environment and a greater focus on higher gross margin business. The contribution from the Memorex acquisition is meeting our expectations and the integration process continues on track." A teleconference is scheduled for 9:00 a.m. CDT today, October 24, 2006. The call-in number is 866-814-1919 (see Webcast and Replay Information at the bottom of this release).
Third Quarter and YTD 2006 and 2005 Financial Highlights
Dollars in millions, except
per share amounts Q3 06 Q3 05 YTD 06 YTD 05
---------------------------- ------ ------ -------- -------
Net Revenue $424.7 $298.6 $1,125.7 $915.1
Gross Profit $88.3 $70.5 $251.7 $228.0
% of Revenue 20.8 % 23.6 % 22.4 % 24.9 %
SG&A $47.4 $33.8 $127.1 $110.2
% of Revenue 11.1 % 11.3 % 11.3 % 12.0 %
R&D $12.6 $13.1 $37.7 $39.1
% of Revenue 3.0 % 4.4 % 3.3 % 4.3 %
Operating Income $28.3 $23.6 $76.2 $78.7
% of Revenue 6.7 % 7.9 % 6.8 % 8.6 %
Income from Continuing
Operations $18.5 $16.8 $50.8 $63.4
Diluted Earnings per Share:
Continuing Operations $0.53 $0.48 $1.44 $1.84
Discontinued Operations $- $- $0.03 $0.18
Net Income $0.53 $0.48 $1.48 $2.01
Operating Cash Flows $38.6 $21.3 $91.9 $47.3
Reconciliation of GAAP to Adjusted Results
Q3 06 YTD 06
--------------------- ---------------------
Diluted EPS Diluted EPS
Dollars in millions, Operating from Cont. Operating from Cont.
except per share amounts Income Ops. Income Ops.
--------------------------- -------- ---------- --------- -----------
As Reported - GAAP $28.3 $0.53 $76.2 $1.44
Additional stock-based
compensation 2.7 0.05 7.0 0.12
Restructuring and other - - 10.7 0.19
Q2 tax benefit - - - (0.03)
------- ---------- ---------
Subtotal 2.7 0.05 17.7 0.28
Adjusted - Non-GAAP $31.0 $0.58 $93.9 $1.72
Percentage change from prior
year 31.4 % 20.8 % 19.3 % (6.5)%
(See Comparison of GAAP to Non-GAAP Financial Measures below.)
Net Revenue was $424.7 million for the quarter, up 42.2 percent from Q3 2005. Excluding Memorex revenue of $109.9 million, revenue increased 5.4 percent compared with the third quarter of 2005 with volume growth of approximately twelve percent and foreign currency benefit of one percent offset by price declines of eight percent. For the nine-month period ended September 30, 2006, revenue was $1,125.7 million, up 23.0 percent from revenue of $915.1 million for Q3 2005. Excluding Memorex revenue of $175.6 million, year-to-date revenue was up 3.8 percent. Gross Margin of 20.8 percent in Q3 2006 was 2.8 percentage points below Q3 2005's margin of 23.6 percent due to product and channel mix changes. For the nine-month periods ended September 30, 2006 and 2005 gross margin was 22.4 percent and 24.9 percent, respectively. Selling, General & Administrative (SG&A) spending was $47.4 million or 11.1 percent of revenue in Q3 2006 compared with $33.8 million or 11.3 percent of revenue, in Q3 2005. The increase was due to the addition of Memorex SG&A expenses, intangible asset amortization and incremental stock-based compensation expense, partially offset by spending declines. For the nine- month periods ended September 30, 2006 and 2005, SG&A spending was $127.1 million and $110.2 million, respectively. Research & Development (R&D) spending of $12.6 million or 3.0 percent of revenue in Q3 2006 was $0.5 million lower than the $13.1 million or 4.4 percent of revenue reported in Q3 2005. For the nine-month periods ended September 30, 2006 and 2005 R&D spending was $37.7 million and $39.1 million, respectively. Operating Income for the quarter was $28.3 million, up 19.9 percent from operating income of $23.6 million reported for the third quarter of 2005. Operating income in Q3 2006 included incremental stock-based compensation expenses of $2.7 million resulting from the adoption of FAS 123R at the beginning of 2006. Operating income in Q3 2005 had no similar stock-based compensation expense. Excluding stock-based compensation expense noted above, operating income would have been $31.0 million in the quarter, up 31.4 percent from the comparable quarter a year ago. Operating income for the nine months ended September 30, 2006 was $76.2 million compared with operating income of $78.7 million for the comparable period a year ago and included restructuring and other charges of $10.7 million associated with integrating the Memorex acquisition and actions taken to simplify structure. Operating income for the nine months ended September 30, 2006 included incremental stock-based compensation expense of $7.0 million. Operating income in the first nine months of 2005 had neither restructuring nor similar stock-based compensation expense. Excluding restructuring and stock-based compensation expense noted above, operating income would have been $93.9 million for the nine-month period ended September 30, 2006, up 19.3 percent from the comparable period a year ago (see table entitled Reconciliation of GAAP to Adjusted Results above). Non-operating Income/Expense and Taxes: Net non-operating income of $1.1 million in Q3 2006 is compared with $1.7 million in Q3 2005. The decline in net non-operating income was primarily due to the reduction of interest income as a result of the decline in cash balances. The tax rate in Q3 2006 was 37 percent, up from the 34 percent tax rate in Q3 2005. Diluted Earnings per Share from continuing operations was $0.53 in Q3 2006 and included $0.05 per share from incremental stock-based compensation expense. This compares with diluted EPS of $0.48 per share for the comparable quarter last year which had no similar stock-based compensation expense. Adjusting for incremental stock-based compensation expense, diluted EPS would have been $0.58 per share in Q3 2006 (see table entitled Reconciliation of GAAP to Adjusted Results above). Cash Flow, Working Capital and Balance Sheet: Cash flow generated from operations totaled approximately $38.6 million for the quarter and included a timing benefit of approximately $10 million that will reverse in the fourth quarter of 2006. For the nine-month period ended September 30, 2006 operating cash flow was $91.9 million. Ending cash and cash equivalents of $245.2 million as of September 30, 2006 decreased by $237.8 million from December 31, 2005 driven by the payment of $329.3 million related to the Memorex acquisition partially offset by cash generated from operations. We repurchased 257,000 shares of common stock in the quarter for $10.2 million, with remaining authorization to repurchase an additional 2.4 million shares. Capital spending was $5.0 million in the quarter. Depreciation and amortization totaled $10.5 million in the quarter. Business Outlook This business outlook is subject to the risks and uncertainties described below.
The table below reconciles the outlook for 2006 Operating Income and
diluted EPS on a GAAP basis with the items impacting 2006 results discussed
above.
Targeted
Targeted Operating Targeted
Revenue Income Diluted EPS
--------------- ----------- --------------
$ Millions $ Millions Per Share
2006 Outlook Before
Restructuring and Incremental
Stock-based Compensation*
(Non-GAAP) $1,570 - $1,600 $127 - $130 $2.35 - $2.41
Restructuring and Other
Charges** - ($11 - $12) ($0.20 - $0.22)
Incremental Stock-based
Compensation Expense** - ($10) ($0.18)
--------------- ----------- --------------
2006 Outlook (GAAP) $1,570 - $1,600 $105 - $108 $1.96 - $2.02
* Ranges include Memorex acquisition-related impacts
** Actual YTD and anticipated
Comparison of GAAP to Non-GAAP Financial Measures The impact of the restructuring charges and other items, as described above, is provided to assist an investor's understanding of the impact of these components on our actual results of operations when compared with prior periods. Imation believes this will assist investors in making an evaluation of our performance against prior periods on a comparable basis by adjusting for those items. 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. Webcast and Replay Information A live webcast of Imation Corp's third quarter teleconference will be available on the Internet on a listen-only basis at http://www.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 October 24, 2006 until 5:00 PM Central Daylight Time on October 30, 2006 by dialing 888-211-2648 (access code 968564). 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 marks its tenth anniversary as an independent company. 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, including the Business Outlook, 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 integrate the Memorex acquisition and achieve anticipated benefits and synergies; our ability to successfully defend our intellectual property, including the Memorex brand and key cross licenses; 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 in a timely manner from the Moser Baer and other strategic relationships, including the Global Data Media joint venture and Exabyte relationships; the competitive pricing environment; 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 Nine months ended
September 30, September 30,
------------------ -----------------
2006 2005 2006 2005
-------- ------- -------- ------
Net revenue $424.7 $298.6 $1,125.7 $915.1
Cost of goods sold 336.4 228.1 874.0 687.1
-------- ------- -------- ------
Gross profit 88.3 70.5 251.7 228.0
Operating expense:
Selling, general and administrative 47.4 33.8 127.1 110.2
Research and development 12.6 13.1 37.7 39.1
Restructuring and other - - 10.7 -
------- ------ -------- -----
Total 60.0 46.9 175.5 149.3
Operating income 28.3 23.6 76.2 78.7
Other (income) and expense:
Interest income (2.2) (3.3) (9.8) (7.7)
Interest expense 0.3 0.2 0.7 0.5
Other, net 0.8 1.4 6.4 6.2
------- ------ -------- -----
Total (1.1) (1.7) (2.7) (1.0)
Income from continuing operations
before income taxes 29.4 25.3 78.9 79.7
Income tax provision 10.9 8.5 28.1 16.3
------- ------ -------- -----
Income from continuing operations 18.5 16.8 50.8 63.4
Discontinued Operations:
Income from operations of
discontinued business, net of
income taxes - - - 1.5
Gain on disposal of discontinued
business, net of income taxes - - 1.2 4.6
------- ------ -------- -----
Income from discontinued
operations net of income taxes - - 1.2 6.1
Net income $18.5 $16.8 $52.0 $69.5
======= ====== ======== =====
Basic earnings per common share:
Continuing operations $0.54 $0.49 $1.47 $1.87
Discontinued operations $- $- $0.03 $0.18
Net income $0.54 $0.49 $1.50 $2.05
Diluted earnings per common share:
Continuing operations $0.53 $0.48 $1.44 $1.84
Discontinued operations $- $- $0.03 $0.18
Net income $0.53 $0.48 $1.48 $2.01
Weighted average basic shares
outstanding 34.5 34.1 34.6 33.9
Weighted average diluted shares
outstanding 35.1 34.9 35.2 34.5
Cash dividend per share $0.14 $0.12 $0.40 $0.34
IMATION CORP.
CONSOLIDATED BALANCE SHEETS
(In millions)
September 30, December 31,
2006 2005
------------- ------------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $245.2 $483.0
Accounts receivable - net 275.6 194.7
Inventories 241.6 134.9
Other current assets 66.3 75.6
------------ ------------
Total current assets 828.7 888.2
Property, plant and equipment - net 182.3 195.0
Other assets 341.7 63.0
------------ ------------
Total assets $1,352.7 $1,146.2
============ ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Accounts payable $217.0 $131.8
Accrued payroll 22.4 22.2
Other current liabilities 147.9 91.1
------------ -----------
Total current liabilities 387.3 245.1
Other liabilities 60.4 45.8
Shareholders' equity 905.0 855.3
------------ ------------
Total liabilities and
shareholders' equity $1,352.7 $1,146.2
========== ===========
Certain of the Company's funds were in active cash management and were
thus classified in other current assets. Total cash and equivalents plus these
investments were as follows:
September 30, December 31,
2006 2005
------------- ------------
Cash and cash equivalents $245.2 $483.0
Cash investments - 24.6
------------- ------------
Total cash and other cash
investments $245.2 $507.6
============= ============
IMATION CORP.
SUPPLEMENTAL INFORMATION
(Dollars in millions)
(Unaudited)
Segment and Product Information
-------------------------------
Q3 2006 Q3 2005 % Change
------------- ------------ --------
Rev $ % Total Rev $ % Total
Americas 248.1 58.4% 143.7 48.1% 72.7%
Europe 125.2 29.5% 98.6 33.0% 27.0%
APAC 51.4 12.1% 56.3 18.9% -8.7%
----- ------ ----- ------
Total 424.7 100.0% 298.6 100.0%
===== ====== ===== ======
Rev $ % Total Rev $ % Total
Magnetic 161.0 37.9% 173.8 58.2% -7.4%
Optical 191.2 45.0% 98.8 33.1% 93.5%
Flash 46.1 10.9% 15.4 5.2% 199.4%
Other 26.4 6.2% 10.6 3.5% 149.1%
----- ------ ----- ------
Total 424.7 100.0% 298.6 100.0%
===== ====== ===== ======
Op Inc $ OI % Op Inc $ OI %
Americas 31.4 12.7% 29.1 20.3% 7.9%
Europe 11.2 8.9% 9.1 9.2% 23.1%
APAC 3.7 7.2% 3.3 5.9% 12.1%
Corp/Unallocated (1) (18.0) NM (17.9) NM NM
----- ----- ------ -----
Total 28.3 6.7% 23.6 7.9%
===== ===== ====== =====
YTD 2006 YTD 2005
--------------- -------------
Rev $ % Total Rev $ % Total
Americas 577.0 51.3% 428.0 46.8% 34.8%
Europe 379.5 33.7% 316.7 34.6% 19.8%
APAC 169.2 15.0% 170.4 18.6% -0.7%
------- ------ ----- ------
Total 1,125.7 100.0% 915.1 100.0%
======= ====== ===== ======
Rev $ % Total Rev $ % Total
Magnetic 493.4 43.9% 520.3 56.8% -5.2%
Optical 473.0 42.0% 317.7 34.7% 48.9%
Flash 92.7 8.2% 39.9 4.4% 132.3%
Other 66.6 5.9% 37.2 4.1% 79.0%
------- ------ ----- ------
Total 1,125.7 100.0% 915.1 100.0%
======= ====== ===== ======
Op Inc $ OI % Op Inc $ OI %
Americas 92.9 16.1% 83.3 19.5% 11.5%
Europe 35.7 9.4% 34.6 10.9% 3.2%
APAC 13.4 7.9% 15.2 8.9% -11.8%
Corp/Unallocated (1) (65.8) NM (54.4) NM NM
------- ------ ----- ------
Total 76.2 6.8% 78.7 8.6%
======= ====== ===== ======
(1) Corporate and unallocated amounts include research and development
expense, corporate results, as well as 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
(Unaudited)
Operations & Cash Flow - Additional Information ($ Millions)
------------------------------------------------------------
Quarter ended Nine months ended
September 30, September 30,
-------------- -----------------
2006 2005 2006 2005
------ ----- ------ -------
Gross Profit $88.3 $70.5 $251.7 $228.0
Gross Margin % 20.8% 23.6% 22.4% 24.9%
Operating Income $28.3 $23.6 $76.2 $78.7
Operating Income % 6.7% 7.9% 6.8% 8.6%
Capital Spending $5.0 $5.2 $12.1 $14.7
Depreciation $7.3 $8.7 $22.0 $25.4
Amortization $3.2 $1.2 $6.1 $4.4
Tax Rate % 37% 34% 36% 20%
Asset Utilization Information *
-------------------------------
September 30, December 31,
2006 2005
------------- ------------
Days Sales Outstanding (DSO) 53 46
Days of Inventory Supply 69 56
Debt to Total Capital 0.0% 0.0%
Other Information
-----------------
Approximate employee count as of September 30, 2006: 2,110
Approximate employee count as of December 31, 2005: 2,100
Book value per share as of September 30, 2006: $26.23
Shares used to calculate book value per share (millions): 34.5
In the third quarter of 2006, Imation repurchased 0.3 million shares
of its stock for $10.2 million.
Authorization for repurchase of an additional 2.4 million shares
remains outstanding as of September 30, 2006.
* These operational measures, which the Company regularly uses, are
provided to assist in the investor's further understanding of the
Company's 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 |