Memorex 2007 Annual Report Download

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Building a portfolio of brands.

Table of contents

  • Page 1
    Building a portfolio of brands.

  • Page 2
    ... gain matches the 20 percent-plus annual growth in demand for storage capacity, driven by the explosion of business data. Increasingly, digital information is created, shared and stored by individuals, whether in a professional setting or for personal use. Presentations, photos, Frank P. Russomanno...

  • Page 3
    ... across adjacent product categories of related audio and video consumer electronics products and accessories. We are building a portfolio of brands based on empirical research. As a foundation for our acquisitions of Memorex, the TDK Recording Media business and the Memcorp business, we undertook...

  • Page 4

  • Page 5
    IMATION _ BUILDING A PORTFOLIO OF BRANDS

  • Page 6
    ... data storage capabilities that provide reliable and secure archiving. We are growing the Imation commercial portfolio across other product pillars as well: recordable optical, including next-generation, high-capacity Blu-ray discs, as well as USB ï¬,ash drives, solid state disks and removable hard...

  • Page 7
    ... his organization, he recently specified the new Imation solid state disks for some of their servers. He regularly specifies and supplies Imation brand ï¬,ash drives to his colleagues in sales. And whether at work or at home, he opts for Imation Blu-ray discs because high performance is his first...

  • Page 8
    ... game. Her job as a marketing researcher has her online all day. When she comes home after work, she brings important files with her on her Pivot Plus USB drive, which appeals to her not just for its capacity; but also for its encryption, keeping her data safe. Portable hard disk drives may be a

  • Page 9
    ... with cutting-edge portable drives that add to the storage of her personal laptop when she goes away for the weekend. First among her peers to buy a Blu-ray recorder, Mi-Kyoung uses Imation Blu-ray discs to copy programming from her DVR. She proudly burns a copy of her favorite TV drama for later...

  • Page 10

  • Page 11
    IMATION _ BUILDING A PORTFOLIO OF BRANDS

  • Page 12
    ... leading market share for recordable CDs and DVDs in North America today, the Memorex brand gives consumers the ability to capture, save and share their digital music, photographs and videos. The Memorex brand is also carried on optical drives, media accessories such as label kits, storage cases and...

  • Page 13
    ... of her family's memories. She uses Memorex CDs and DVDs to backup and store her photos and home videos. At the last family gathering, she gave her parents a Memorex digital picture frame filled with her most recent photos of the kids. Her new Memorex LCD TV enlivens the family room, where...

  • Page 14

  • Page 15
    IMATION _ BUILDING A PORTFOLIO OF BRANDS

  • Page 16
    ... in Europe and Japan, the TDK Life on Record brand meets consumers' exacting demands for accessibility, creativity and longevity. From ï¬,ash media to optical CDs and groundbreaking 8cm Blu-ray discs, the TDK Life on Record brand delivers products that hold an enviable position within the digitally...

  • Page 17
    ...been transferred to TDK Life on Record DVDs. Marco makes music mixes on TDK Life on Record CDs, which remind him of good times long ago. Their cherished family videos, which they delight in playing back and reliving special moments, are always recorded using TDK Life on Record Blu-ray discs. And now...

  • Page 18
    ... market reach and presence. Over the last several years, we have joined with premier companies to be their distribution partner for removable data storage media. Major brands we distribute include IBM and Sun StorageTek brand tape cartridges and HP Brand CD/DVD optical media products and accessories...

  • Page 19
    EXPANDING OUR LIST OF DISTRIBUTION PARTNERS IMATION _ BUILDING A PORTFOLIO OF BRANDS

  • Page 20
    ... brands and expand beyond removable media into audio and video consumer electronics products and accessories, we are transforming Imation into a brand and product management company. Through this change, one constant endures: our commitment to meeting customer needs. As technologies evolve and new...

  • Page 21
    ... was manufactured using 100% certified renewable energy. It is printed with soy inks. © Imation 2008 52003 71006 Imation, the Imation logo, Memorex, 'Is it live or is it Memorex?' are trademarks of Imation Corp. and its subsidiaries. The TDK Life on Record logo is a trademark of TDK Corporation...

  • Page 22

  • Page 23
    2007 Annual Report and Form 10-K

  • Page 24
    ... transforming Imation into a global brand and product management company. Last May, we articulated a clear, straightforward and actionable strategy, describing how the Company will change over the next few years. In Q3, we closed on two additional acquisitions of the TDK Recording Media business and...

  • Page 25
    ...in advanced Blu-ray optical media. With TDK Corporation as our largest shareholder with approximately 20 percent ownership, Imation and TDK have set the foundation for a long-term, mutually beneficial strategic relationship. With our Memcorp business acquisition, now called Electronics Products, we...

  • Page 26
    IMATION'S LEADERSHIP TEAM REMAINS COMMITTED TO TRANSFORMING THE COMPANY AND BUILDING LONGTERM SHAREHOLDER VALUE. WE WILL MEASURE OUR PROGRESS IN 2008 AGAINST CLEAR PRIORITIES AROUND ENHANCING CUSTOMER LOYALTY, STRENGTHENING EMPLOYEE ENGAGEMENT, MEETING OUR GROWTH AND FINANCIAL PERFORMANCE TARGETS, ...

  • Page 27
    EUROPE ELECTRONICS PRODUCTS AMERICAS 46% 32% REVENUES_2007 ASIA-PACIFIC GLOBAL DOLLARS IN MILLIONS 6% 16% PERCENT OF 2007 REVENUES See Item 6 "Selected Financial Data" and Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form ...

  • Page 28
    ...on sale of businesses Loan impairment Operating income Income (loss) from continuing ops before cumulative effect of accounting change and discontinued ops Net income (loss) Earnings (loss) per common share from continuing ops: Basic Diluted Net earnings (loss) per common share: Basic Diluted Number...

  • Page 29
    ...Act). Yes n No ¥ Aggregate market value of voting and non-voting stock of the registrant held by non-affiliates of the registrant, based on the closing price of $36.86 as reported on the New York Stock Exchange on June 29, 2007, was $1,275 million. The number of shares outstanding of the registrant...

  • Page 30
    ... ABOUT MARKET RISK ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ITEM 9A CONTROLS AND PROCEDURES ITEM 9B OTHER INFORMATION ITEM 10 ITEM 11 ITEM 12 ITEM 13 ITEM 14 PART III DIRECTORS, EXECUTIVE OFFICERS...

  • Page 31
    ... stock of its operating subsidiaries engaged in the business of the design, development, sourcing, marketing, distribution and sale of hardware, media and accessories used for the storage of electronic data under the Memorex brand name. This action strengthened our position in optical products...

  • Page 32
    ...further information. • On July 31, 2007, we acquired substantially all of the assets relating to the marketing, distribution, sales, customer service and support of removable recording media products, accessory products and ancillary products being sold under the TDK Life on Record brand name (TDK...

  • Page 33
    ... data center markets and selling consumer electronic products and accessories. We completed the Memcorp acquisition and entered into the consumer electronics market during the third quarter of 2007. Our data storage media business is organized, managed and internally and externally reported...

  • Page 34
    ... under the Memorex brand name. Data Storage Media The Data Storage Media segment is organized, managed and reported, internally and externally, differentiated by the regional markets we serve: Americas, Europe and Asia Pacific. Each of these segments has the responsibility for selling virtually all...

  • Page 35
    ... of recordable CDs, DVDs and advanced optical media, primarily Blu-ray. Magnetic products consist of data storage tape media, floppy diskettes and audio and video tape products. Flash products consist of USB flash drives and flash cards. Electronic products consist of consumer electronic products...

  • Page 36
    ... by mid-2009. Those activities include conversion of coated tape into finished cartridges and manufacture of plastic components. We do not manufacture optical media, removable hard disk, USB flash drive products or consumer electronic products or storage accessories as they are currently sourced...

  • Page 37
    ... to use the TDK Life on Record brand for current and future recordable magnetic, optical, flash media and accessory products globally. That right is revocable by TDK in the year 2032, with a one year wind down. During 2007, we were awarded 32 U.S. patents relating to our data storage business and...

  • Page 38
    ...of Data Storage and Information Management and General Manager of Advanced Imaging Technologies. Prior to joining Imation, he held multiple sales and marketing positions with 3M Company, including European Business Director. Bradley D. Allen, age 57, is Vice President, Investor Relations, a position...

  • Page 39
    ..., sales, customer service and support of removable recording media products, accessory products and ancillary products being sold under the TDK Life on Record brand name. In July 2007, we also acquired certain assets of Memcorp relating to the sourcing and sale of consumer electronic products...

  • Page 40
    ..., we acquired substantially all of the assets of Memorex relating to the design, development, sourcing, marketing, distribution and sale of hardware, media and accessories used for the storage of electronic data under the Memorex brand name. Our success with the Memorex branded products is dependent...

  • Page 41
    ... changes. Since price competition is a common factor in both the removable data storage media and consumer electronics markets, we risk reducing profitability if we cannot reduce costs and manage inventory in line with price declines. We expect price pressures across our portfolio of products...

  • Page 42
    ... the Company into a brand and product management organization and increasing our reliance on retail trade customers. Our success is dependent on our ability to successfully offer trade terms that are acceptable to our customers and are aligned with our pricing and profitability targets. Our business...

  • Page 43
    ... 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 a potential goodwill impairment which was analyzed and recorded. While the fair value of our...

  • Page 44
    ... are in good operating condition suitable for their respective uses and are adequate for our current needs. Facility Function Electronic Products Kowloon, Hong Kong (leased) ...Administrative Weston, Florida (leased) ...Sales/Administrative/Distribution Center Data Storage Media Americas Anaheim...

  • Page 45
    ..., such as USB flash drives and certain flash card formats, infringe these patents and is seeking damages for prior sales, and an injunction and/or royalties on future sales. This action has been stayed pending resolution of the related case described below. Also on October 24, 2007, SanDisk filed...

  • Page 46
    ... stock, $0.01 par value (common stock), outstanding held by approximately 24,850 shareholders of record. Our common stock is listed on the New York and Chicago Stock Exchanges under the symbol of IMN. The Board of Directors declared a dividend of $0.14 per share of common stock in February 2007...

  • Page 47
    ... represents the number of shares repurchased as part of publicly announced programs to repurchase up to 5.0 million shares of our common stock. (d) On April 17, 2007, our Board of Directors authorized the repurchase of 5.0 million shares of common stock. The previous share repurchase program, which...

  • Page 48
    ... Software business ...Loan impairment ...Operating (loss) income ...(Loss) income from continuing operations ...Net (loss) income...(Loss) earnings per common share from continuing operations: Basic ...Diluted ...Net (loss) earnings per common share: Basic ...Diluted ...Balance Sheet Data: Working...

  • Page 49
    ...our recordable optical discs, USB flash drives, flash cards, removable hard drives and audio and video tape to store, edit and manage data, photos, video, images and music. We also sell a range of consumer video, audio and home electronic products through retailers in North America. The data storage...

  • Page 50
    ... of the TDK Recording Media, Memcorp and Memorex businesses are included in our consolidated results of operations from their respective dates of acquisition. See Note 3 to the Consolidated Financial Statements for further information. Accounting for Uncertainty in Income Taxes Effective January...

  • Page 51
    ... negative impacts of USB flash products and declining revenue and gross margins of legacy magnetic tape products. The product mix changes were primarily due to the acquisitions of the TDK Recording Media and Memcorp businesses in the third quarter of 2007 and the acquisition of Memorex in the second...

  • Page 52
    ... performance in 2006 in magnetic, optical and USB flash drive product categories when compared with 2005. Selling, General and Administrative (SG&A) Years Ended December 31, 2007 2006 2005 (Dollars in millions) Percent Change 2007 vs. 2006 2006 vs. 2005 Selling, general and administrative ...$223...

  • Page 53
    ... North Dakota plant, which we plan to exit by mid-2009. The R&D organization will be aligned to focus on key programs in support of future advanced magnetic tape formats and our increased growth and focus on consumer digital storage products and accessories. As of December 31, 2007, we estimate that...

  • Page 54
    ...the repurchase of $108.2 million of common stock during 2007, the acquisitions of the TDK Recording Media and Memcorp businesses in the third quarter of 2007 as well as the acquisition of Memorex in the second quarter of 2006. Our 2006 increase in interest income was primarily attributed to interest...

  • Page 55
    ... data center markets and selling consumer electronic products and accessories. We completed the Memcorp acquisition and entered into the consumer electronics market during the third quarter of 2007. Our data storage media business is organized, managed and internally and externally reported...

  • Page 56
    ...in 2007 was driven mainly by additional revenue from the TDK Recording Media acquisition of $125.8 million and growth in flash media products offset partially by declines in magnetic products. The 2006 net revenue growth for our Europe segment of 14.9 percent was driven by increased sales of optical...

  • Page 57
    ... of consumer video, audio and home electronic products, primarily in North America and primarily under the Memorex brand name. In addition the EP segment includes a brand licensing agreement with MTV Networks, a division of Viacom International, to design and distribute consumer electronic items...

  • Page 58
    ... items totaling $154.8 million offset by working capital changes of $16.9 million. Non-cash items included a goodwill impairment charge of $94.1 million, depreciation and amortization of $46.9 million and stock-based compensation of $10.2 million. Large cash outflows in 2007 included net income tax...

  • Page 59
    ... payments of $14.9 million, pension funding of $14.8 million and tax payments of $5.2 million. Cash used in investing activities was $82.5 million in 2007. Investing activity in 2007 included net cash payments of $41.1 million for the TDK Recording Media acquisition and $32.7 million for the...

  • Page 60
    ...46 per share or $15.7 million during 2005. Any future dividends are at the discretion of and subject to the approval of Imation's Board of Directors. We contributed $5.6 million to our defined benefit pension plans during 2007. Based on this funding, as well as the market performance on plan assets...

  • Page 61
    ...to $70 million and $20 million related to the TDK Recording Media and the Memcorp business acquisitions, respectively, contingent on future financial performance of the acquired businesses. We have not recorded a liability for these contingent payments at December 31, 2007 as payment is not probable...

  • Page 62
    ... recorded for uncertain tax positions are included in our income tax provision. As of December 31, 2007, $0.6 million of interest and penalties was accrued, excluding the tax benefits of deductible interest. Fiscal years 2006 and 2007 remain subject to examination by the Internal Revenue Service...

  • Page 63
    ... and market share, (2) the length of time that the trade name has been in existence, (3) the period of time over which the trade name is expected to remain in use and (4) the strength of the trade name and its perseverance through changes in the data storage industry. In determining the useful lives...

  • Page 64
    ... business units as follows: Change in Fair Change in Fair Value from a Value from a 1% Decrease in 1% Increase in Discount Rate Discount Rate (In millions) Americas-Commercial ...Asia Pacific ...Electronic Products... $15.0 10.0 5.0 $(15.0) (10.0) (5.0) The TDK Recording Media acquisition...

  • Page 65
    ...and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. Companies are required to adopt the new standard for fiscal periods beginning after November 15, 2007. We did...

  • Page 66
    ...revenue growth targets; our ability to successfully implement our global manufacturing strategy for magnetic data storage products and changes to our R&D organization and to realize the benefits expected from the related restructuring; our ability to introduce new offerings in a timely manner either...

  • Page 67
    Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to various market risks including volatility in foreign currency exchange rates and credit risk. International operations, which comprised approximately 54 percent of our revenue in 2007, may be subject to various ...

  • Page 68
    ... for Defined Benefit Pension and Other Postretirement Plans. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance...

  • Page 69
    ... 2007 because they were acquired by the Company in purchase business combinations during 2007. We have also excluded the TDK Recording Media and Memcorp businesses from our audit of internal control over financial reporting. TDK Recording Media and Memcorp businesses total assets and total net sales...

  • Page 70
    ... operations ...Discontinued operations: Income from operations of discontinued businesses, net of income taxes ...Gain on disposal of discontinued businesses, net of income taxes ... Income from discontinued operations ...- Net (loss) income ...$ (50.4) (Loss) earnings per common share - basic...

  • Page 71
    ...and outstanding ...Common stock, $.01 par value, authorized 100 million shares, 42.9 million issued ...Additional paid-in capital ...Retained earnings ...Accumulated other comprehensive loss ...Treasury stock, at cost, 4.5 million and 7.9 million shares as of December 31, 2007 and 2006, respectively...

  • Page 72
    ... (104,155 shares) ...Stock-based compensation related to options ...Terminated employment agreement ...TDK Recording Media acquisition (6,825,764 shares) ...FIN 48 adjustment ...Tax benefit from shareholder transactions ...Dividend payments ...Comprehensive loss: Net loss ...Net change in cumulative...

  • Page 73
    ...expenditures...Acquisitions, net of cash acquired ...Purchase of investments...Proceeds from sale of investments...Proceeds from sale of businesses ...Other investing activities ...Net cash (used in) provided by investing activities ...Cash Flows from Financing Activities: Purchase of treasury stock...

  • Page 74
    ... of 3M Company. As used herein, the terms "Imation," "Company," " we," "us," or "our" mean Imation Corp. and its subsidiaries unless the context indicates otherwise. We develop, manufacture, source, market and distribute removable data storage media products and certain electronic products. Through...

  • Page 75
    ...Capitalized costs include only (1) external direct costs of materials and services consumed in developing or obtaining internal-use software, (2) payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use software project and (3) interest...

  • Page 76
    ...from such estimates. Revenue Recognition. We sell a wide range of data storage media products as well as certain consumer electronic products. Net revenue consists primarily of magnetic, optical, flash media, consumer electronics and accessories product sales. We recognize revenue in accordance with...

  • Page 77
    ... at December 31, 2007 and 2006. Rebates. We provide rebates to our customers. Customer rebates are accounted for as a reduction of revenue at the time of sale based on an estimate of the cost to honor the related rebate programs. Income Taxes. We account for income taxes under the provisions of...

  • Page 78
    ... using the weighted average number of shares outstanding during the year. Diluted earnings per share is computed on the basis of the weighted average basic shares outstanding plus the dilutive effect of our stock-based compensation plans using the "treasury stock" method. The following table sets...

  • Page 79
    ... relating to the marketing, distribution, sales, customer service and support of removable recording media products, accessory products and ancillary products under the TDK Life on Record brand name (TDK Recording Media), from TDK Corporation, a Japanese corporation (TDK), pursuant to an acquisition...

  • Page 80
    ...products including audio, video and data storage tape, and Blu-ray optical discs, which TDK will supply us as well as its other OEM customers. We also entered into a Supply Agreement, dated July 31, 2007, with TDK to purchase Imation's requirements of removable recording media products and accessory...

  • Page 81
    ... Agreement, we acquired the assets of Memcorp used in or relating to the sourcing and sale of consumer electronic products, principally sold under the Memorex brand name, including inventories, equipment and other tangible personal property and intellectual property. The acquisition also included...

  • Page 82
    ..., development, sourcing, marketing, distribution and sale of hardware, media and accessories used for the storage of electronic data under the Memorex brand name. Memorex's product portfolio includes recordable CDs and DVDs, branded accessories, USB flash drives and magnetic and optical drives. 53

  • Page 83
    ...net earnings before interest, income taxes, depreciation and amortization (EBITDA) of the purchased business as defined in the acquisition agreement previously filed by Imation as Exhibit 2.1 to our Current Report on Form 8-K filed January 25, 2006. We placed $33.0 million of the purchase price paid...

  • Page 84
    ... and market share, (2) the length of time that the Memorex trade name has been in existence, (3) the period of time over which the Memorex trade name is expected to remain in use and (4) that the Memorex trade name has remained strong through technological innovation in the data storage industry...

  • Page 85
    ... of income tax ...- Gain from disposal of discontinued businesses, net of income tax ...1.2 Income from discontinued operations ...$1.2 Note 5 - Supplemental Balance Sheet Information $20.1 2.4 0.9 1.5 4.6 $ 6.1 As of December 31, 2007 2006 (In millions) Inventories, net Finished goods ...Work in...

  • Page 86
    ... 31, 2007 2006 (In millions) Other Assets Deferred income taxes ...Long term investments ...Other ...Total other assets ...Other Current Liabilities Rebates ...Employee separation costs ...Income taxes ...Other ...Total other current liabilities ...Other Liabilities Pension ...Deferred income taxes...

  • Page 87
    ...Americas Europe Asia Pacific (In millions) Electronic Products Total Balance as of December 31, 2005 ...Memorex acquisition ...Balance as of December 31, 2006 ...Memorex post-closing purchase price adjustments. Memcorp acquisition ...TDK Recording Media acquisition ...Adjustments of acquisition tax...

  • Page 88
    ... share price at the date of our annual impairment test. There are also various assumptions used under the market approach that affect the valuation of our reporting units. The most significant assumptions are the market multiples and control premium. In estimating the fair value of our company under...

  • Page 89
    ... business units as follows: Change in Fair Change in Fair Value from a Value from a 1% Decrease in 1% Increase in Discount Rate Discount Rate (In millions) Americas-Commercial ...Asia Pacific ...Electronic Products ... $15.0 10.0 5.0 $(15.0) (10.0) (5.0) The TDK Recording Media acquisition...

  • Page 90
    ...December 31, 2007. In connection with the Memcorp acquisition which closed on July 9, 2007, we issued promissory notes totaling $37.5 million payable to Hopper Radio of Florida, Inc., a Florida corporation, Memcorp, Inc., a Florida corporation, and Memcorp Asia Limited, a corporation organized under...

  • Page 91
    ...to focus on key programs in support of future advanced magnetic tape formats and our increased growth and focus on consumer digital storage products and accessories. Severance, severance related costs and lease termination costs. During the second quarter of 2007, we recorded estimated severance and...

  • Page 92
    ... of the pension curtailment in Note 11. Terminated Employment Agreement On April 2, 2007, the Board of Directors and Mr. Henderson mutually determined that Mr. Henderson would resign as Chairman of the Board and CEO of the Company effective as of the close of business on April 2, 2007 due to...

  • Page 93
    ... 2006 Imation and Memorex restructuring program was substantially completed as of June 30, 2007. 2006 Activity Severance, severance related costs and lease termination costs. During the first quarter of 2006, we recorded severance and severance related charges of $1.8 million. The charges related to...

  • Page 94
    ... amount of unrecognized tax benefits that would affect the Company's effective tax rate, if recognized is $9.3 million as of December 31, 2007. Our policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of income tax expense in the...

  • Page 95
    ... will continue to accrue. The components of income (loss) from continuing operations before income taxes were as follows: Years Ended December 31, 2007 2006 2005 (In millions) U.S ...$(65.6) International ...31.0 Total ...$(34.6) The income tax provision from continuing operations was as follows...

  • Page 96
    ...and 2005 cash paid for income taxes, relating to both continuing and discontinued operations, was $9.6 million, $22.0 million and $5.2 million, respectively. As of December 31, 2007, approximately $101.7 million of earnings attributable to international subsidiaries were considered to be permanently...

  • Page 97
    ... FINANCIAL STATEMENTS - (Continued) $3.2 million, net of a $1.7 million tax benefit. In connection with our actions taken under our 2007 cost reduction restructuring program, the number of employees accumulating benefits under our pension plan in the United States was reduced significantly, which...

  • Page 98
    ... States International As of December 31, As of December 31, 2007 2006 2007 2006 (In millions) Net loss ...Prior service cost (credit) ...Transition asset obligation ...Total ... $7.3 0.8 - $8.1 $ 10.4 1.3 - $ 11.7 $ 0.7 (3.6) 2.3 $(0.6) $10.6 (3.6) 2.3 $ 9.3 Information for pension plans with...

  • Page 99
    ... expected cash flows. The current target asset allocation includes equity securities at 50 to 80 percent, debt securities at 15 to 25 percent and other investments at 10 to 25 percent. Management reviews our U.S. investment policy for the plan at least annually. Outside the United States, the...

  • Page 100
    ... prices are equal to the fair market value of our common stock on the date of grant. As a result of the approval and adoption of the 2000 Incentive Plan in May 2000, no further shares are available for grant under the Employee Plan. The Directors Plan was also approved and adopted by 3M Company...

  • Page 101
    ... prices are equal to the fair market value of our common stock on the date of grant. As of December 31, 2007, there were 1,094,372 shares available for grant under the 2005 Incentive Plan. Stock Options Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS 123(R), using...

  • Page 102
    ... - (Continued) The following table summarizes stock option activity for the years ended December 31, 2007 and 2006: Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Stock Options Aggregate Intrinsic Value Outstanding December 31, 2005 Granted...Exercised...

  • Page 103
    ... diluted earnings per share for the years ended December 31, 2007 and 2006 was $0.14 per share and $0.17 per share, respectively. Restricted Stock The following table summarizes restricted stock activity for the years ended December 31, 2007 and 2006: Weighted Average Grant Date Fair Value Per Share...

  • Page 104
    ...) income taxes, respectively. The related tax benefit was $1.2 million and $0.9 million for the years ended December 31, 2007 and 2006, respectively. As of December 31, 2007, there was $5.6 million of total unrecognized compensation expense related to restricted stock granted under our Stock Plans...

  • Page 105
    ... cease to own at least 75 percent of the shares issued related to the acquisition of the TDK Recording Media business or cease to be holders of record of at least 10 percent of the common stock as a result of Imation issuing additional shares. TDK can not become the beneficial owner of more than...

  • Page 106
    ... data center markets and selling consumer electronic products and accessories. We completed the Memcorp acquisition and entered into the consumer electronics market during the third quarter of 2007. Our data storage media business is organized, managed and internally and externally reported...

  • Page 107
    ... Ended December 31, 2007 2006 2005 (In millions) Optical products ...$ 954.2 Magnetic products...703.9 Flash media products ...157.1 Electronic products ...118.1 Accessories and other ...128.7 Total ...$2,062.0 The following tables present net revenue and long-lived assets by geographical region...

  • Page 108
    ...not apply to Imation's acquisition of Memorex; (4) the cross-license does not apply to DVD discs; (5) certain Philips patents that are not covered by the cross-license are infringed by Imation; and (6) as a result, Imation owes Philips royalties for the prior and future sales of CD and DVD discs. We...

  • Page 109
    ..., such as USB flash drives and certain flash card formats, infringe these patents and is seeking damages for prior sales, and an injunction and/or royalties on future sales. This action has been stayed pending resolution of the related case described below. Also on October 24, 2007, SanDisk filed...

  • Page 110
    ... 19 - Related Party Transactions As a result of the TDK Recording Media business acquisition, TDK became our largest shareholder and owned approximately 20 percent of our shares as of December 31, 2007. In connection with the acquisition we entered into a Supply Agreement and a Transition Services...

  • Page 111
    ... of Imation's internal control over financial reporting as of December 31, 2007 excluded the assets of the TDK Recording Media business and the Memcorp business, which were each acquired in July 2007 in a purchase business combination. The TDK Recording Media business and the Memcorp business are...

  • Page 112
    ..., Executive Officers and Corporate Governance. Board of Directors Information regarding our Board of Directors as of February 29, 2008 is set forth below: Michael S. Fields, Chairman and Chief Executive Officer of KANA Software, Inc. (a customer relationship management software and services company...

  • Page 113
    ... and Voting - Security Ownership of Management" and "Item No. 3 Approval of the 2008 Stock Incentive Plan - Equity Compensation Plan Information" are incorporated by reference into this Form 10-K. Item 13. Certain Relationships and Related Transactions, and Director Independence. The Sections...

  • Page 114
    ..., dated April 19, 2007, by and between Imation Corp. and TDK Corporation (incorporated by reference to Exhibit 2.1 to Imation's Form 8-K Current Report filed on April 25, 2007) Acquisition Agreement, dated January 19, 2006, by and between Imation Corp. and Memorex International Inc. (incorporated by...

  • Page 115
    ... filed on August 3, 2007) Investor Rights Agreement, dated July 31, 2007, by and between Imation Corp. and TDK Corporation (incorporated by reference to Exhibit 10.1 to Imation's Form 8-K Current Report filed on August 3, 2007) Imation 1996 Employee Stock Incentive Program (incorporated by reference...

  • Page 116
    ... Form of Stock Option Agreement - Executive Officers 2004 (incorporated by reference to Exhibit 10.4 of Imation's Form 10-Q for the quarter ended September 30, 2004) Description of 2007 Annual Bonus Plan Target Approval (incorporated by reference to Imation's Form 8-K Current Report filed on January...

  • Page 117
    Number Description of Exhibit 10.52* 10.53* 10.54* 21.1 23.1 24.1 31.1 31.2 32.1 32.2 Form of Executive Officer Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.11 to Imation's Form 8-K Current Report filed on February 13, 2006) Credit Agreement between Imation and a ...

  • Page 118
    ...13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. IMATION CORP. By: /s/ FRANK P . RUSSOMANNO Frank P . Russomanno President and Chief Executive Officer Date: February 29, 2008 89

  • Page 119
    ... to the requirements of the Securities Exchange Act of 1934, this report has been signed below by ...Officer (Principal Executive Officer) Vice President and Chief Financial Officer (Principal Financial Officer) Corporate Controller and Chief Accounting Officer (Principal Accounting Officer) Director...

  • Page 120
    EXHIBIT INDEX Exhibit Number Description of Exhibit 10.1 10.3 21.1 23.1 24.1 31.1 31.2 32.1 32.2 Form of Amended and Restated Severance Agreement with Executive Officers Directors Compensation Program, as amended Subsidiaries of Imation Corp. Consent of Independent Registered Public Accounting ...

  • Page 121
    ... ...TDK Marketing Europe GmbH ...TDK Polska SP Zoo ...Imation Ireland Ltd...Global Data Media FZ-LLC ...Glyphics Media Inc...MBI International FZ-LLC ...MBI International Services Private Ltd...MBII India Marketing Private Ltd...Memorex Products Inc...Memorex Products Europe Ltd...Memorex Products...

  • Page 122
    ... 333-38196, 333-66030 and 333-124634), of Imation Corp. of our report dated February 29, 2008, relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PRICEWATERHOUSECOOPERS LLP PricewaterhouseCoopers...

  • Page 123
    ...his or her name, place and stead, in any and all capacities, to sign the 2007 Annual Report on Form 10-K of Imation Corp., and any...Corporate Controller and Chief Accounting Officer (Principal Accounting Officer) Director Director Director Director Director Director Director Director Director Director...

  • Page 124
    ... to Section 302 of the Sarbanes-Oxley Act of 2002 I, Frank P . Russomanno, certify that: 1. I have reviewed this annual report on Form 10-K of Imation Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to...

  • Page 125
    ...Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Paul R. Zeller, certify that: 1. I have reviewed this annual report on Form 10-K of Imation Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to...

  • Page 126
    ... of 2002 In connection with the Annual Report of Imation Corp. (the "Company") on Form 10-K for the period ended December 31, 2007, as filed with the Securities and Exchange Commission (the "Report"), I, Frank P . Russomanno, President and Chief Executive Officer of the Company, certify, pursuant to...

  • Page 127
    ... of 2002 In connection with the Annual Report of Imation Corp. (the "Company") on Form 10-K for the period ended December 31, 2007, as filed with the Securities and Exchange Commission (the "Report"), I, Paul R. Zeller, Vice President and Chief Financial Officer of the Company, certify, pursuant to...

  • Page 128
    ... business hours of 7:00 a.m. to 5:30 p.m. (CST) Product Information Visit imation.com, memorex.com, and tdk-media.com Annual Shareholders Meeting Wednesday, May 7, 2008, 9:00 a.m. (local time) The Hotel Sofitel New York 45 West 44th Street New York, NY 10036 Stock Listings New York Stock Exchange...

  • Page 129
    ... was manufactured using 100% certified renewable energy. It is printed with soy inks. © Imation 2008 52003 70909 Imation, the Imation logo, Memorex, 'Is it live or is it Memorex?' are trademarks of Imation Corp. and its subsidiaries. The TDK Life on Record logo is a trademark of TDK Corporation...