What are you looking for ?
Infinidat
Articles_top

Imation: Fiscal 4Q07 Financial Results

+53% for the year-to-year quarterly revenue (but including TDK and Memcorp) with operating loss of $70 million

Imation Corp. released financial results for the fourth quarter and full
year ended December 31, 2007.

Highlights for Q4 2007
  • Revenue of $701.8 million was up 52.9 percent compared with Q4 2006 revenue of $459.0 million. The TDK Recording Media and Memcorp acquisitions which closed in Q3 2007 contributed $252.5 million to 4th quarter revenue.
  • Operating loss for the quarter was $70.3 million including a previously announced goodwill impairment charge of $94.1 million and $12.6 million of restructuring and other charges. This is compared with operating income of $32.0 million in Q4 2006, which included $1.2 million of restructuring and other charges. Excluding these charges, operating income on a Non-GAAP basis for Q4 2007 was $36.4 million compared with $33.2 million in the prior year (see table entitled Reconciliation of GAAP to Adjusted Results below).
  • The Company posted a loss of $1.91 per share for Q4 2007, including a $2.55 negative impact from goodwill impairment and restructuring and other charges. This compares with diluted earnings per share of $0.69 for Q4 2006. Excluding goodwill impairment and restructuring and other charges, on a Non-GAAP basis, diluted EPS for Q4 2007 would have been $0.64 as compared with $0.71 on the same basis in the prior year (see table entitled Reconciliation of GAAP to Adjusted Results below).
  • Total cash from operations for the fourth quarter was a record $74.1 million and the Company repurchased approximately 1,277,000 shares during the quarter for $28.6 million.
  • On January 28, 2008, the Audit and Finance Committee, upon authority delegated to it from the Board of Directors, authorized a share repurchase program increasing total outstanding authorization to 3 million shares of common stock. The Company’s previous authorization was cancelled with the new authorization.

Frank Russomanno, President and Chief Executive Officer of Imation, said:
"Our positive fourth quarter results before special charges demonstrate the
resilience of the Company and the value of our strategic direction. We had
solid contributions from our acquisitions, especially the TDK Recording Media
business as well as our base business which benefited from a more focused
market approach to USB Flash. During the fourth quarter we continued to
operationalize key elements of our strategy as we transform Imation to a brand
and product management company. We are encouraged by the positive reception
from commercial and consumer channel partners as we move forward with our
portfolio of brands and electronic products and with the enduring strength of
and contributions from our cornerstone tape business.
"

"This year will be an important transition year for the Company as we
complete the integration of the acquisitions and continue with our
manufacturing restructuring program. Associated with these actions, our
outlook includes incremental restructuring, I.T. and other integration costs
as well as incremental investments in building our brands globally. The
benefit from these actions will be greater in the second half of 2008. In
addition, we are seeing increased seasonality as we transform the Company. As
a result, we expect earnings in the second half of the year to be stronger
than the first half of 2008. In particular, Q1 2008 will have a difficult
comparison with Q1 2007
."

Fourth Quarter and YTD 2007 Financial Highlights

Net Revenue was $701.8 million for the quarter, up 52.9 percent from Q4
2006 revenue of $459.0 million. Revenue for full year 2007 was $2,062.0
million, up 30.1 percent from revenue of $1,584.7 million for the comparable
period last year. Revenue for the three-month and full year periods ended
December 31, 2007 included revenue of $252.5 million and $393.2 million,
respectively, from the acquired TDK Recording Media and Memcorp businesses.
This increase was offset in part by a revenue decline in our Global Data Media
joint venture which had previously included TDK brand revenue. The Q4 2007
total revenue growth was generated by overall volume growth of approximately
58 percent due to the acquisitions and favorable currency impact of four
percent partially offset by price erosion of nine percent.

Gross Margin of 16.5 percent in Q4 2007 was up slightly from 16.3 percent
in Q3 2007. The gross margin was down from 20.1 percent in Q4 2006 due mainly
to product mix shifts as anticipated. For the years ended December 31, 2007
and 2006, gross margins were 17.3 percent and 21.7 percent, respectively. The
year over year decline was due to the impact of product mix, negative impacts
of USB Flash products and declining revenue and gross margins of legacy
products.

Selling, General & Administrative (SG&A) spending in Q4 2007 was $71.8
million or 10.2 percent of revenue, compared with $46.9 million or 10.2
percent of revenue in Q4 2006. For the years ended December 31, 2007 and 2006,
SG&A spending was $223.3 million or 10.8 percent of revenue and $174.0 million
or 11.0 percent of revenue, respectively. The increase in SG&A expense in
dollar terms during Q4 2007 was associated with the acquired TDK Recording
Media and Memcorp businesses.

Research & Development (R&D) spending in Q4 2007 was $7.7 million or 1.1
percent of revenue, compared with $12.3 million or 2.7 percent of revenue
reported in Q4 2006. For the years ended December 31, 2007 and 2006, R&D
spending was $38.2 million and $50.0 million, respectively. The declines were
due to cost savings from restructuring activities initiated in Q2 2007 as the
Company became more focused with its R&D activities.

Restructuring and Other Charges of $12.6 million in Q4 2007 and $33.3
million in FY 2007 were recorded under the Company’s restructuring program
announced in Q2 2007. These charges are associated with changes in
manufacturing and R&D. We recorded $1.2 million and $11.9 million of
restructuring and other charges in Q4 2006 and FY 2006, respectively,
associated with integrating the Memorex acquisition and actions taken to
simplify structure.

Goodwill Impairment of $94.1 million was recorded in Q4 2007. Accounting
standards require the reconciliation of current market capitalization to book
value when completing the annual goodwill impairment assessment. At stock
price levels during the fourth quarter, the Company’s total book value was
above its market capitalization, indicating the presence of goodwill
impairment which was analyzed and recorded. This non-cash charge is unrelated
to the performance of the recent acquisitions or management’s view of the
value of its acquisitions, but rather to the market capitalization of the
Company.

Operating Loss for Q4 2007 was $70.3 million, compared with operating
income of $32.0 million reported in Q4 2006. The operating loss for Q4 2007
included goodwill impairment and restructuring and other charges of $106.7
million. Excluding goodwill impairment and restructuring and other charges
noted above, operating income would have been $36.4 million in Q4 2007 as
compared with $33.2 million in Q4 2006. Operating loss for the full year ended
December 31, 2007 was $33.0 million compared with operating income of $108.2
million for the comparable year ago period. Excluding goodwill impairment and
restructuring and other charges noted above, operating income would have been
$94.4 million in FY 2007 as compared with $120.1 million in FY 2006 (see table
entitled Reconciliation of GAAP to Adjusted Results above).

Income Taxes: The 2007 tax provision for Q4 and FY 2007 was $0.8 million
and $15.8 million, respectively. Both of these amounts include a tax benefit
of $4.0 million associated with the goodwill impairment charge of $94.1
million. Excluding the impact of the goodwill impairment, the tax rate was 23
percent for Q4 2007 and 33 percent for FY 2007. This compares to a tax rate of
26 percent for Q4 2006 and 33 percent for FY 2006.

Diluted Earnings/Loss per Share was a loss of $1.91 for Q4 2007 compared
with earnings of $0.69 in Q4 2006. Excluding goodwill impairment and
restructuring and other charges, on a Non-GAAP basis diluted EPS was $0.64 and
$0.71 during Q4 2007 and Q4 2006, respectively (see table entitled
Reconciliation of GAAP to Adjusted Results above).

Cash and Cash Flows: Ending cash and cash equivalents were $135.5 million
as of December 31, 2007, up $2.4 million during the quarter. Cash flow
generated from operations during Q4 2007 was a record $74.1 million. Uses of
cash during Q4 2007 included net cash payments of $35.2 million related to the
TDK Recording Media and Memcorp acquisitions, as well as the repurchase of
approximately 1,277,000 shares of common stock in the quarter for $28.6
million. Capital spending was $2.7 million and dividends of $6.3 million were
paid in Q4 2007. Depreciation and amortization totaled $13.5 million for the
quarter.

2008 Business Outlook

The following statements are based on our current outlook for fiscal 2008
and include the full year anticipated impact from integration of the acquired
TDK Recording Media and Memcorp businesses as well as continued implementation
of our previously announced restructuring program. The 2008 outlook is subject
to change and is subject to the risks and uncertainties described below.

    • Revenue for 2008 is targeted at approximately $2.4 billion, representing growth of approximately 16 percent over 2007.
    • 2008 operating income on a GAAP basis is targeted between $95 million and $105 million including restructuring charges of $4 million to $6 million.
    • On a Non-GAAP basis, excluding restructuring charges, operating income for the year is targeted between $100 million and $110 million.
    • Diluted earnings per share on a GAAP basis for 2008 is targeted between $1.51 and $1.68, which includes the negative impact of approximately $0.08 from restructuring charges.
    • On a Non-GAAP basis, excluding the impact of restructuring, diluted earnings per share for the full year is targeted between $1.59 and $1.76. This is based on year end 2007 diluted shares outstanding of 38.5 million.
    • Capital spending for 2008 is targeted between $15 million and $20 million.
    • The tax rate for 2008 is anticipated in a range of 35 percent to 37 percent, absent any one-time tax items that may occur.
    • Depreciation and amortization expense for 2008 is targeted between $48 million and $52 million.
    					
    	
 
Imation Corp.

 

Comments

Revenue for 4Q07 was up 53% from 4Q06 at $702 million, but it includes the TDK and Memcorp acquisitions this year. Without them, it decreases 2%. Total sales for the year exceeds slightly $2 billion. It's not a record. In 1998, the company was at $2.2 billion, a figure that Imation hopes to surpass in 2008.

Optical products now represent the majority of Imation's sales, 47.7% for the most recent quarter and 46.3% for the year, but they generate lower margins as they are not manufactured by Imation.

That's the same for flash products, also subcontracted: from 5.6% to 11.7% for the quarter, and from 6.1% to 12.0% for the year.

Its core business, magnetic products, more profitable, decreased from 36.5% in 4Q06 to 30.4% in 4Q07, and from 41.7% in 2006 to 34.1% in 2007. 

We will not be surprised to see Imation making an acquisition or a joint-venture with a flash manufacturer during the year after its recent strategic partnership with Mtron.

Articles_bottom
AIC
ATTO
OPEN-E