Memorex 2007 Annual Report Download - page 25

Download and view the complete annual report

Please find page 25 of the 2007 Memorex annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 129

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129

IMATION _ AR/10K2007
02
A REMEMBRANCE: This past year, we lost Imation’s former CEO Bruce Henderson, who passed away after a courageous battle with
cancer. Bruce’s legacy at Imation will live on in the impact he had on the company strategy and direction. More
importantly, Bruce’s determination and positive spirit as he battled his illness remain an inspiration to all of us.
By acquiring the TDK recording media business and a long-term
license to the TDK Life on Record™ brand, we gained complementary
market coverage to our Memorex and Imation brands in specific regions
and consumer segments, particularly in Japan and Europe. Through
our strategic sourcing agreement with TDK, we also benefited from
their solid technology leadership, especially 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 purchased a solid consumer electronics
business with strong marketing, branding and sourcing skills.
We had other successes as well. We have expanded our skill sets and
breadth of experience to match the transformation in our Company
as we build an organizational capability – with both internal talent
and external hires – around global brand management. With each
acquisition, we have brought in new people, with new ways of looking
at our markets and new ideas on which to build for the future. Our
acquisitions contributed positively, particularly in the fourth quarter,
and we posted solid results for our base tape and optical businesses.
Throughout the year, we also continued to launch new products,
including a line of consumer electronics products for children and
“tweens,” using well-known Nickelodeon characters under the
NPower™ brand. Finally, we also established global distribution
agreements for CD/DVD HP brand optical media and accessories,
and for Sun StorageTek brand data storage media.
While we achieved strong year-over-year revenue growth of 30
percent in 2007 driven by our acquisitions, we missed our other
financial targets for the year – particularly in operating income. The
disappointing results were primarily driven by highly volatile price
fluctuations, which impacted our U.S. retail USB flash drive business.
This disappointing financial performance was clearly reflected in our
declining stock price, which in turn resulted in a $94.1 million non-
cash write down of goodwill, reported in our year-end results.
We took aggressive actions in Q3, changing our go-to-market
approach for USB flash drives, reducing our risk and exposure. We
were able to achieve a strong finish in Q4 to an otherwise challenging
year. In the fourth quarter, we posted revenues of $701.8 million and
operating cash flow of $74.1 million, both quarterly records in the
Company’s history. Our full financial results for 2007 are discussed in
detail in the accompanying Form 10-K Report.
As we continue our transformation, 2008 will be another important
year for Imation. We began 2008 with our portfolio of recognized and
respected brands, strong market position, growing product offerings,
significant industry partnerships and a broad global footprint. We
will continue to invest in our brands, in broadening our skill sets,
developing key tape technologies and collaborating with our channel
partners. We will also complete the integration of the TDK recording
media business and the optimization of our tape manufacturing
operations begun last year.
We look forward to 2008 as a year in which we make progress against
the many opportunities we have to increase shareholder value.
Thank you for your continued interest and support.
Sincerely,
Linda W. Hart Frank P. Russomanno
Non-Executive President,
Chairman of the Board Chief Executive Officer and Director