SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM____________TO____________.
COMMISSION FILE NUMBER: 1-14310
----------------------------
IMATION CORP.
(Exact name of registrant as specified in its charter)
A DELAWARE 41-1838504
CORPORATION
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1 IMATION PLACE
OAKDALE, MINNESOTA 55128
(Address of principal executive offices)
(612) 704-4000
(Registrant's telephone number, including area code)
--------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 42,395,462 shares of Common
Stock, par value $0.01 per share, were outstanding at April 30, 1997.
IMATION CORP.
INDEX
PAGE(S)
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Operations
for the three month periods ended
March 31, 1997 and 1996 3
Condensed Consolidated Balance Sheets as
of March 31, 1997 and December 31, 1996 4
Condensed Consolidated Statements of Cash
Flows for the three month periods ended
March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6-8
Report of Independent Accountants 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 10-15
PART II. OTHER INFORMATION 16
SIGNATURE 17
EXHIBITS 18-20
PART I. FINANCIAL INFORMATION
IMATION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Millions, Except Per Share Amounts)
(Unaudited)
Three months ended March 31,
----------------------------
1997 1996
------- ------
Net revenues $547.7 $576.1
Cost of goods sold 348.7 373.8
------- ------
Gross profit 199.0 202.3
Operating expenses:
Selling, general and
administrative 133.0 130.7
Research and development 37.8 47.9
Restructuring charges - 10.4
------- ------
Total 170.8 189.0
Operating income 28.2 13.3
Other income and expense:
Interest expense 2.4 3.7
Other, net 4.0 (0.5)
------- -------
Total 6.4 3.2
Income before tax and
minority interest 21.8 10.1
Income tax provision 9.8 4.1
Minority interest - (0.1)
------- -------
Net income $ 12.0 $ 6.1
======= ======
Earnings per share $ 0.30 $ 0.14
======= ======
Weighted average shares
outstanding 40.7 41.9
======= ======
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
IMATION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Millions, Except Share Amounts)
March 31,
1997 December 31,
(Unaudited) 1996
--------- --------
ASSETS
Current Assets
Cash and equivalents $ 55.2 $ 61.7
Accounts receivable - net 465.9 467.6
Inventories 407.5 392.8
Other current assets 85.1 94.5
--------- --------
Total current assets 1,013.7 1,016.6
Property, Plant and Equipment - net 461.5 480.1
Other Assets 73.8 64.6
--------- --------
Total Assets $1,549.0 $1,561.3
========= ========
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 179.8 $ 182.1
Accrued payroll 40.4 41.9
Income taxes payable 6.5 7.6
Short-term debt 24.3 26.5
Other current liabilities 140.4 151.2
--------- --------
Total current liabilities 391.4 409.3
Other Liabilities 96.4 98.6
Long-Term Debt 148.8 123.1
Commitments and Contingencies
Shareholders' Equity - net 912.4 930.3
Shares issued:
March 31, 1997: 42,898,045
December 31, 1996: 42,879,880
--------- --------
Total Liabilities and Shareholders' Equity $1,549.0 $1,561.3
========= ========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
IMATION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)
Three months ended
March 31,
------------------
1997 1996
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12.0 $ 6.1
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 38.1 48.5
Deferred income taxes 3.7 6.1
Restructuring and other one-time charges - 10.4
Working capital changes (38.0) 7.8
Other 3.4 (9.2)
------- -------
Net cash provided by operating activities 19.2 69.7
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (28.0) (40.7)
Capitalized software (11.2) -
Other (1.0) 0.6
------- ------
Net cash used in investing activities (40.2) (40.1)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term debt (0.9) -
Borrowings of long-term debt 246.6 -
Repayment of long-term debt (220.6) -
Purchases of treasury shares (12.8) -
Decrease in unearned ESOP shares 2.8 -
Employee stock plans and other 0.1 -
Net cash paid to 3M - (27.0)
------- -------
Net cash provided by (used in) financing activities 15.2 (27.0)
Effect of exchange rate changes on cash (0.7) (2.6)
------- -------
Net change in cash and equivalents (6.5) -
Cash and equivalents - beginning of period 61.7 -
------- -------
Cash and equivalents - end of period $ 55.2 $ -
======= =======
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
IMATION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. FINANCIAL STATEMENTS
Imation Corp. (the "Company") became an independent, publicly held company as of
July 1, 1996 (the "Distribution Date"), when Minnesota Mining and Manufacturing
("3M") spun off its data storage and imaging businesses as an independent,
publicly held company (the "Distribution"). One share of the Company's common
stock was issued for every ten shares of 3M stock outstanding to stockholders of
record on June 18, 1996. 3M and the Company have entered into a number of
agreements to facilitate the transition of the Company to an independent
business enterprise. Descriptions of the various agreements are set forth under
the caption "Relationship Between 3M and the Company" contained in the Company's
1996 Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
The consolidated financial statements for periods prior to July 1, 1996 reflect
the assets, liabilities, revenues, and expenses that were directly related to
the Company as it was operated within 3M. The Company's consolidated statements
of operations for periods prior to July 1, 1996 include all of the related costs
of doing business including an allocation of certain general corporate expenses
of 3M which were not directly related to these businesses, including costs for
corporate logistics, corporate research and development, information
technologies, finance, legal and corporate executives. Management believes these
allocations were made on a reasonable basis. All material inter-company
transactions and balances between the Company's businesses have been eliminated.
The financial information included herein for periods prior to July 1, 1996 may
not necessarily be indicative of the results of operations or cash flows of the
Company if it had been a separate, independent company during the periods prior
to July 1, 1996.
The interim consolidated financial statements are unaudited but, in the opinion
of management, reflect all adjustments necessary for a fair presentation of
financial position, results of operations and cash flows for the periods
presented. These adjustments, except for the restructuring charges recorded in
1996, consist of normal, recurring items. The results of operations for any
interim period are not necessarily indicative of results for the full year. The
consolidated financial statements and notes are presented as permitted by the
requirements for Form 10-Q and do not contain certain information included in
the Company's annual consolidated financial statements and notes. This Form 10-Q
should be read in conjunction with the Company's consolidated financial
statements and notes included in its 1996 Annual Report on Form 10-K.
2. SUPPLEMENTAL BALANCE SHEET INFORMATION
March 31,
1997 December 31,
(Unaudited) 1996
---------- ---------
(In millions, except share amounts)
Inventories
Finished goods $ 270.2 $ 248.1
Work in process 57.4 57.3
Raw materials and supplies 79.9 87.4
---------- ---------
Total inventories $ 407.5 $ 392.8
========== =========
Property, Plant and Equipment
Property, plant and equipment $ 1,700.8 $ 1,709.9
Less accumulated depreciation (1,239.3) (1,229.8)
---------- ---------
Property, plant and equipment - net $ 461.5 $ 480.1
========== =========
Shareholders' Equity
Common stock $ 0.4 $ 0.4
Additional paid-in capital 1,012.1 1,011.5
Retained earnings 23.2 11.2
Unearned ESOP shares (43.8) (46.6)
Cumulative translation adjustment (66.7) (46.2)
Treasury stock, at cost
March 31, 1997: 514,141 shares (12.8) -
---------- ---------
Total shareholders' equity $ 912.4 $ 930.3
========== =========
3. COMMITMENTS AND CONTINGENCIES
Discussion of legal matters is cross-referenced to this Form 10-Q, Part II, Item
1, Legal Proceedings, and should be considered an integral part of the
Consolidated Financial Statements and Notes.
4. MASTER LEASE AND SECURITY AGREEMENT
In March 1997, the Company entered into a Master Lease and Security Agreement in
connection with the construction of a new research and development facility at
the Company's headquarters site. Construction is expected to be completed in
June 1998, at which time the lease payments will commence. The Company has the
option to purchase the facility at the end of the lease term, March 2002. In the
event the Company chooses not to exercise this purchase option, the Company is
obligated to arrange for the sale of the facility and has guaranteed the lessor
a sale price of $58.5 million.
5. INTEREST RATE SWAP AGREEMENT
Effective March 25, 1997, the Company entered into an interest rate swap
agreement with a financial institution. The notional amount of the interest rate
swap agreement is $100 million with the Company paying fixed rate and receiving
variable rate. The agreement expires March 31, 2000. Net payments or receipts
under the agreement are recorded as adjustments to interest expense. As of March
31, 1997, the effective interest rate on the $146.0 million in debt outstanding
under the Company's revolving credit facility was 6.42%, including the effect of
the interest rate swap agreement.
6. EARNINGS PER SHARE
The number of weighted average shares outstanding used in the computation of
earnings per share (EPS) for the first quarter of 1996 is equal to one-tenth the
weighted average number of 3M shares outstanding based on the distribution ratio
of one share of Imation Corp. for every ten shares of 3M pursuant to the
spin-off on July 1, 1996.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share". This statement establishes standards for computing
and presenting basic and diluted earnings per share for financial statements
issued for periods ending after December 15, 1997. The adoption of this
statement is not expected to have a material effect on the Company's reported
EPS.
*****
Coopers & Lybrand L.L.P., the Company's independent accountants, have performed
a review of the unaudited interim consolidated financial statements included
herein and their report thereon accompanies this filing.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of Imation Corp.:
We have reviewed the accompanying condensed consolidated balance sheet of
Imation Corp. (the Company) as of March 31, 1997, and the related consolidated
statements of operations and condensed consolidated statements of cash flows for
the three-month periods ended March 31, 1997 and 1996. These consolidated
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1996, and the
related consolidated statements of operations and cash flows for the year then
ended (not presented herein); and in our report dated February 14, 1997, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1996, is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
April 30, 1997
IMATION CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL OVERVIEW
On June 18, 1996, the Board of Directors of Minnesota Mining and Manufacturing
Company ("3M") approved the spin-off of Imation Corp., a Delaware corporation
(the "Company"), which is comprised of substantially all of the businesses
previously operated within 3M's data storage and imaging systems groups. To
effectuate the transaction, the Board of Directors of 3M declared a dividend
payable to the holders of record of 3M common stock as of June 28, 1996, based
upon a ratio of one share of the Company's common stock, par value $0.01 per
share (the "Common Stock") for every ten shares of 3M common stock owned on the
record date. Effective July 1, 1996, all of the outstanding shares of Common
Stock were distributed to 3M stockholders (the "Distribution"). Following the
Distribution, the Company began operations as an independent, publicly held
company. Prior to July 1, 1996, the financial statements reflect the results of
operations and cash flows of the businesses transferred to the Company from 3M
as they operated within 3M. As a result, the financial statements of the Company
prior to July 1, 1996 have been carved out from the financial statements of 3M
using the historical results of operations and historical basis of the assets
and liabilities of such businesses. The Company's statements of operations prior
to July 1, 1996 include all of the related costs of doing business, including
charges for the use of facilities and for employee benefits, and include an
allocation of certain general corporate expenses of 3M which were not directly
related to these businesses including costs for corporate logistics, corporate
research and development, information technologies, finance, legal and corporate
executives. Management believes these allocations were made on a reasonable
basis. The financial information included herein for periods prior to July 1,
1996 may not necessarily be indicative of the results of operations or cash
flows of the Company had the Company been a separate, independent company during
the periods prior to July 1, 1996.
At the time of the Distribution, the Company established an overall financial
goal of improving the Company's economic profit (measured as after-tax operating
income in excess of a charge for the use of capital) by $150 million during the
three year period of 1996 to 1998, as compared to 1995. This goal is based on
anticipated cost reductions and the Company's objectives for improved revenue
growth and improved asset utilization.
During the first quarter of 1997, the Company improved economic profit by $7.5
million over the first quarter of 1996. Cost reductions and improved asset
management generated approximately $7.0 million and $6.0 million, respectively,
of this improvement, partially offset by the revenue decline. Since the
beginning of 1996, economic profit has improved by approximately $72 million,
with $36 million of the improvement coming from cost reductions and $36 million
from improved asset management.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 AND 1996
The following table displays the components of the Company's consolidated
statements of operations as a percentage of total revenues. The 1996 percentages
exclude the impact of $10.4 million of pretax restructuring charges ($6.1
million after tax) recorded in the first quarter of 1996.
Three Months Ended
March 31,
--------------------
Adjusted
1997 1996
------ ------
Net revenues 100.0% 100.0%
Cost of goods sold 63.7% 64.9%
------ ------
Gross profit 36.3% 35.1%
Operating expenses:
Selling, general
and administrative 24.3% 22.7%
Research and development 6.9% 8.3%
------ ------
Total 31.2% 31.0%
Operating income 5.1% 4.1%
Other income and expense:
Interest expense 0.4% 0.6%
Other, net 0.7% (0.1%)
------ -------
Total 1.1% 0.5%
Income before tax and
minority interest 4.0% 3.6%
Income tax provision 1.8% 1.5%
Minority interest - -
------ ------
Net income 2.2% 2.1%
====== ======
Net revenues for the first quarter of 1997 were $547.7 million, a decrease of
$28.4 million or 4.9 percent from the same period in 1996. Volume increases of
3.5 percent were more than offset by price declines of 4.9 percent and the
negative effect of changes in currency exchange rates of 3.5 percent. Volume
growth was negatively impacted approximately 2.6 percent by the Company's
decision to reduce sales in certain low margin product lines in which the
Company is operating under a harvest strategy, including a portion of the
Company's non-branded duplicator diskette sales, certain photo color markets and
certain graphic arts supplies. Volume growth was also negatively impacted by
weakness in the Company's European operations. The Company's growth portfolio,
including Luminous software products, represented approximately 16 percent of
revenues, up from 7 percent in the first quarter of 1996 and up from 11 percent
for the full year of 1996. Price erosion of 4.9 percent improved from the price
erosion experienced in the first quarter of 1996 of 5.6 percent and is
consistent with the Company's expectations.
Net revenues in the United States decreased 1.7 percent with volume increases of
1.3 percent more than offset by pricing declines of 3.0 percent.
Internationally, net revenues decreased 8.0 percent. Volume increases of 5.5
percent were more than offset by price declines of 6.7 percent and a 6.8 percent
negative effect of changes in currency exchange rates. Based on the currency
exchange rates as of March 31, 1997, changes in currency exchange rates will
continue to negatively impact revenues and earnings on a quarter over the same
quarter of the previous year basis for the remainder of 1997, although to a
lesser degree than in the first quarter of 1997. International revenues
accounted for 49.6 percent of first quarter 1997 revenues, down from 51.3
percent of total revenues for first quarter 1996.
Gross profit in the first quarter of 1997 was $199.0 million or 36.3 percent of
revenues, an increase of 1.2 percentage points from the first quarter of 1996.
This increase is due to unit cost reductions, raw material price declines and
the reduction of sales in some low margin product lines, partially offset by
negative pricing pressure and foreign currency impacts.
Selling, general and administrative (SG&A) expenses were $133.0 million or 24.3
percent of revenues, up $2.3 million or 1.6 percentage points from the same
period in 1996. The increase is driven by $4.7 million, or 0.9% of revenues, of
costs related to designing and implementing more efficient business processes
and developing the Company's brand identity that were incurred in the first
quarter of 1997. There were no comparable costs in the first quarter of 1996. It
is expected that these start-up costs will continue throughout 1997. The
remaining increase in SG&A expenses as a percentage of revenues is primarily due
to the decline in revenues.
Research and development costs totaled $37.8 million or 6.9 percent of revenues
in the first quarter of 1997, down $10.1 million or 1.4 percentage points from
the same period in 1996. This decrease reflects the efficiencies and
productivity the Company has obtained by the consolidation of laboratories and
the reduction of spending on harvest businesses, partially offset by investment
in key future technology programs.
The Company recorded restructuring charges of $10.4 million in the first quarter
of 1996 reflecting costs for certain voluntary employee separation programs. No
such charges were recorded in the first quarter of 1997.
Operating income for the first quarter of 1997 was $28.2 million, or 5.1 percent
of revenues. This represents a $4.5 million increase over operating income in
the first quarter of 1996 of $23.7 million, after excluding the first quarter
1996 restructuring charges.
First quarter 1997 interest expense was $2.4 million, down $1.3 million from the
same quarter last year. This decrease was due to lower average debt balances and
a lower effective interest rate. Interest expense prior to July 1, 1996 was
based on an assumed $250 million in outstanding debt and 3M's effective interest
rate during the period. The allocation of interest expense for periods prior to
July 1, 1996 is more fully discussed in Note 7 of the Notes to Consolidated
Financial Statements included in the Company's 1996 Annual Report on Form 10-K.
The net other income and expense in the first quarter of 1997 totaled $4.0
million of expense, compared to $0.5 million of income in the comparable period
of 1996. The 1997 expense is primarily due to transaction losses on foreign
currency exposures.
The Company's effective tax rate in the first quarter of 1997 was 45.0 percent,
compared to 41.0 percent in the first quarter of 1996 and 48.2 percent in the
last six months of 1996 (excluding the impact of the non-deductible $12.0
million write-off of the in-process research and development related to the
Luminous acquisition that occurred in the fourth quarter of 1996). The first
quarter 1997 rate is lower than the rate incurred as an independent company in
1996 as the Company has started to realize the benefits of its new,
tax-effective structure.
Net income in the first quarter of 1997 was $12.0 million, or $.30 per share.
Net income in the comparable period of 1996 was $6.1 million, or $.14 per share.
Excluding restructuring charges, first quarter 1996 net income would have been
$12.2 million, or $.29 per share.
FINANCIAL POSITION
The Company had 3.4 months of inventory on hand at March 31, 1997, up from 3.2
months at December 31, 1996. This increase is due to ongoing implementation of
plant consolidations, start-up of outsourcing certain product lines and the
ongoing transition from 65 3M warehouses globally towards the Company's goal of
29 warehouses. The accounts receivable days sales outstanding was 76 days at
March 31, 1997, up from 75 days at December 31, 1996.
The book value of property, plant and equipment at March 31, 1997 was $461.5, a
decrease of $18.6 million from the December 31, 1996 balance of $480.1 million.
This decrease is primarily due to capital spending being lower than
depreciation.
LIQUIDITY
Prior to July 1, 1996, cash and equivalents and debt were not allocated to the
Company from 3M since 3M uses a centralized approach to cash management and the
financing of its operations. The Company's financing requirements prior to July
1, 1996 are represented by cash transactions with 3M and are reflected in "Net
cash paid to 3M" in the consolidated statements of cash flows. This financial
support was discontinued following the Distribution.
Cash provided by operating activities was $19.2 million during the three months
ended March 31, 1997, compared to $69.7 million during the same period in 1996.
This change was primarily due to working capital increasing $38.0 million in the
first quarter of 1997, while working capital decreased $7.8 million in the
comparable period of 1996. In addition, depreciation decreased $10.4 million,
from $48.5 million in the first quarter of 1996 to $38.1 million in the first
quarter of 1997.
Cash used in investing activities was $40.2 million for the first three months
of 1997 compared to $40.1 million in the comparable period of 1996. Investing
activities included capital expenditures of $28.0 million for the first quarter
of 1997 compared to $40.7 million during the same period of 1996. It is expected
that capital expenditures will approximately equal depreciation for all of 1997.
Capitalized software was $11.2 million in the first quarter of 1997, primarily
related to establishing information technology systems independent of 3M. It is
expected that capitalized software costs related to establishing independent
systems will continue through the remainder of 1997. Amortization of these costs
will not begin until the systems are implemented, beginning in late 1997.
Financing activities during the first quarter of 1997 provided cash of $15.2
million. Financing activities primarily related to the net borrowing of $25.1
million and the payment of $12.8 million to repurchase approximately 514,000 of
the Company's common shares. In the first quarter of 1997, the Company's board
of directors authorized the Company to repurchase up to six million shares of
the Company's common stock.
At March 31, 1997, the Company's ratio of total debt to total capital was 15.9%.
The Company believes this ratio will increase over time due to the cash
requirements for funding future growth opportunities. The Company also believes
it has the financial resources needed to meet its business requirements in the
foreseeable future.
FORWARD-LOOKING STATEMENTS
Certain information contained in this report which does not relate to historical
financial information may be deemed to constitute forward looking statements.
The words or phrases "will likely result", "are expected to", "will continue",
"is anticipated", "estimate", "project", "believe" or similar expressions
identify "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain
risks and uncertainties which could cause actual results to differ materially
from historical results and those presently anticipated or projected. The
Company wishes to caution readers not to place undue reliance on any such
forward looking statements, which speak only as of the date made. Among the
factors that could cause the Company's actual results in the future to differ
materially from any opinions or statements expressed with respect to future
periods are market acceptance of newly introduced products, competitive industry
conditions including historical price erosion in certain product categories,
technological developments in the markets served by the Company, foreign
currency fluctuations, the Company's ability to establish its operations as an
independent company, and the various factors set forth in the Company's 1996
Annual Report on Form 10-K.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company, in the ordinary course of its business, is the subject of various
pending or threatened legal actions. All such matters are subject to many
uncertainties and outcomes that are not predictable with assurance.
Consequently, the Company is unable to ascertain the ultimate aggregate amount
of monetary liability or financial impact with respect to these matters. While
these matters could materially affect operating results of any one quarter when
resolved in future periods, it is management's opinion that after final
disposition, any monetary liability or financial impact to the Company beyond
that provided in the condensed consolidated balance sheet would not be material
to the Company's financial position or annual results of operations or cash
flows.
Items 2-5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) The following documents are filed as exhibits to this Report.
(11) A statement regarding the computation of common shares
and common share equivalents. Page 19.
(15) An awareness letter from the Company's independent
accountants regarding unaudited interim financial
statements. Page 20.
(27) Financial data schedule (EDGAR filing only).
(b) No reports on Form 8-K were filed during the quarter ended March
31, 1997.
SIGNATURE
Pursuant to the requirements 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.
-------------
(REGISTRANT)
Date: May 15, 1997 By: /s/ Jill D. Burchill
-------------------------
Jill D. Burchill
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number Description
- ------ ------------------------------------------------------
11 A statement regarding the computation of common shares
and common share equivalents. Page 19.
15 An awareness letter from the Company's independent
accountants regarding unaudited interim financial
statements. Page 20.
27 Financial data schedule (EDGAR filing only).
EXHIBIT 11
IMATION CORP.
COMPUTATION OF COMMON SHARES AND COMMON SHARE EQUIVALENTS
(IN MILLIONS)
(UNAUDITED)
Three months ended
March 31,
--------------------
1997 1996
-------- -------
Weighted average number of shares outstanding
during the period (a) 42.7 41.9
Weighted average number of shares held by the
ESOP not committed to be released (2.0) --
Common share equivalents resulting from the
assumed exercise of stock options (b) 0.6 --
-------- -------
Total common shares and common share equivalents 41.3 (c) 41.9
(a) The number of shares used to compute earnings per share for the period
prior to July 1, 1996 are based on one-tenth of the average 3M shares
outstanding based on the distribution ratio of one share of the
Company's common stock for every ten shares of 3M common stock held on
the record date.
(b) Common share equivalents for the quarter ended March 31, 1997 are
computed by the "treasury stock" method. This method first determines
the number of shares issuable under stock options that have an option
price below the average market price for the period, and then deducts
the number of shares that could be repurchased with the proceeds of
options exercised. Common share equivalents for primary and fully
diluted earnings per share were essentially equivalent.
(c) Common share equivalents for the quarter ended March 31, 1997 are not
material. As a result, earnings per share have been computed using the
weighted average number of shares outstanding less the weighted average
number of shares held by the ESOP not committed to be released, or 40.7
million weighted average shares outstanding.
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Imation Corp.
Registrations on Form S-8
We are aware that our report dated April 30, 1997 on our reviews of the interim
consolidated financial information of Imation Corp. (the Company) for the three
month periods ended March 31, 1997 and 1996, and included in the Company's Form
10-Q for the quarter ended March 31, 1997, is incorporated by reference in the
Company's Registration Statements on Form S-8 (Registration Nos. 333-15273,
333-15275 and 333-15277). Pursuant to Rule 436(c), under the Securities Act of
1933, this report should not be considered part of the Registration Statements
prepared or certified by us within the meaning of Sections 7 and 11 of that Act.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
May 15, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH CONSOLIDATED FINANCIAL STATEMENTS AND NOTES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 55,200
<SECURITIES> 0
<RECEIVABLES> 487,200
<ALLOWANCES> (21,300)
<INVENTORY> 407,500
<CURRENT-ASSETS> 1,013,700
<PP&E> 1,700,800
<DEPRECIATION> (1,239,300)
<TOTAL-ASSETS> 1,549,000
<CURRENT-LIABILITIES> 391,400
<BONDS> 148,800
<COMMON> 400
0
0
<OTHER-SE> 912,000
<TOTAL-LIABILITY-AND-EQUITY> 1,549,000
<SALES> 547,700
<TOTAL-REVENUES> 547,700
<CGS> 348,700
<TOTAL-COSTS> 348,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,400
<INCOME-PRETAX> 21,800
<INCOME-TAX> 9,800
<INCOME-CONTINUING> 12,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,000
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
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