Memorex 2013 Annual Report Download - page 2

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As a result, we performed as expected financially
in 2013. Revenue for 2013 was $860.8 million,
while EBITDA* was a positive $3.6 million versus a
sizable loss in 2012. We reduced expenses by
more than 30 percent, excluding acquisitions, and
gross margins improved to 21.9 percent in 2013,
compared to 16 percent at the start of our
transformation in 2011. We anticipate more
increases in gross margins over time as we launch
higher margin products in both of our businesses.
We made excellent progress on working capital
management and maintained a strong balance
sheet, ending the year with $133 million in cash.
THE PATH FORWARD
Looking at 2014 and beyond, we remain committed
to our strategic transformation, which will lead to
less dependence on our legacy media
businesses—and more focus on emerging
opportunities in data storage and data security,
across both business units and all channels.
We believe our scalable hybrid Nexsan storage and
IronKey brand solutions offer significant growth
opportunities, and we are investing appropriately.
We ramped up Nexsan investments in the second
half of 2013, by aggressively hiring technical
support and sales talent, introducing new products
and promoting our solutions around the world.
To address consumer needs in data storage and
accessories, Imation continues to introduce
differentiated new products into the retail market,
including innovative offerings under the TDK Life
on RecordTM brand. While Imation’s legacy media
businesses will continue to contract and cause
Imation to shrink more in the short run, we are
dedicated to providing high-quality products and
services in important consumer categories.
We enter 2014 confident in our transformation
strategy and committed to both long-term success
and to being a key global player in our markets.
Imation can return to growth by leveraging our
historical strengths and core data storage
technology and continuing to execute our strategy.
Sincerely,
DEAR FELLOW IMATION SHAREHOLDER,
L. White Matthews, III
Non-Executive
Chairman of the Board
*See back cover for reconciliation of non-GAAP financial measure.
Mark E. Lucas
President and
Chief Executive Officer
Imation’s historical strength in data storage media
with tape and optical technology is leading us into the
future. The company has been a trusted provider of
data storage media for more than 60 years and,
during that time, we have amassed a broad technology
portfolio containing 263 patents. As an acknowledged
market share leader, we have built a global and
diverse customer base, in many different channels —
from retail to small and medium business, and from
original equipment manufacturers (OEMs) to large
enterprises. It is these deep data storage roots and
channel infrastructure that we are leveraging as we
position Imation for sustainable long-term growth.
2013 IN REVIEW
In 2013, we executed against several important goals
that align with our focus on new data storage and
data security solutions. Given that Imation’s legacy
optical and tape media businesses are in secular
decline, in 2011, we announced our strategy to transform
the company into a provider of products in higher
margin categories in growing markets. Since then,
we have acted with urgency to implement that
strategy, and 2013 was a year of significant progress.
We started the year by moving to a more
customer-friendly organizational structure, by forming
two distinct business units—Consumer Storage
Accessories (CSA), which focuses on consumer and
retail partners, and Tiered Storage and Security
Solutions (TSS), dedicated to commercial and OEM
channels. We have skilled and accomplished executives
leading both of these segments.
Within TSS, we acquired NexsanTM on December 31,
2012 with a plan to combine Imation’s data storage
core and geographic reach with Nexsan’s proven
storage systems to build a platform for long-term
growth. This important acquisition allowed Imation
to enter the scalable hybrid solutions market, where
we see strong growth prospects.
The data security business launched uniquely
differentiated IronKey™ Workspace, Microsoft
Certified Windows To Go® products. Our expanded
line of PC on a Stick™ solutions is opening up new
opportunities for the IronKey brand in both the
private and public sectors globally.
On the operations side, to right size the company,
we restructured the organization and took out a
significant amount of legacy expenses, and also
became a smaller, more nimble Imation, while
improving customer service levels worldwide.
A key element of our restructuring was to divest
Imation’s two non-strategic XtremeMacTM and
MemorexTM consumer electronics brands. We sold
both of these low-margin businesses and were able
to maintain or increase our market share in the
remaining Imation legacy businesses that we are
continuing to operate efficiently.