Company Announces Restructuring Charges of up to $40 Million
OAKDALE, Minn., Nov. 10 /PRNewswire-FirstCall/ --
Imation Corp. (NYSE:IMN) released further details of its previously announced plans to reduce operating expenses. The Company's Board of Directors approved a restructuring program to accelerate alignment of the Company's cost structure with its strategic direction.
Commenting on the announcement, Imation President and CEO Frank Russomanno said: "We remain committed to our strategy as we accelerate our transformation of Imation into a brand and product marketing company. We have benchmarked ourselves against companies with brand portfolios and those with significant distribution businesses across both commercial and consumer markets, as we examine our business model. Given our year-to-date performance as well as current market and industry conditions it is necessary that we set a goal of aggressively reducing total operating expenses by year-end 2009 to align our business model with our strategic direction."
"We will reduce our operating expenses in excess of ten percent. We will also focus on reducing selling, general and administrative expense by targeting our resources on key accounts and key products, and simplifying our corporate structure globally. At the same time we will continue to invest to re-skill the Company, strengthen our brands and maintain tape technology leadership critical for our future. By taking these steps, we believe we will create the necessary structure and business model for profitable growth as a lean and fast acting company focused on delivering improved operating profit and return on invested capital," Russomanno concluded.
Key points of the program include the following:
-- The Company anticipates absorbing up to $40 million in restructuring and other charges, of which approximately $25 million will be recorded in Q4 2008. The restructuring and other charges will mainly be cash for severance and related costs and the majority of the program is expected to be completed by the end of 2009.
-- The restructuring actions covered by these charges will result in estimated annualized cost eliminations targeted at greater than $40 million once fully implemented. These actions will be implemented over time, with the vast majority completed by the end of 2009.
-- The restructuring actions will result in the elimination of approximately 200 positions around the world.
-- The Company has revised its outlook for fourth quarter and full year 2008 (see 2008 Business Outlook at the end of this release) to reflect the fourth quarter charges.
2008 Business Outlook
Except where noted below as a result of the restructuring and other charges, this outlook is unchanged from the most recent outlook provided on October 21, 2008. This outlook, while based on our best estimates at this time, contains uncertainty due to global economic conditions. In addition, the recent decline in our stock price and deterioration in economic conditions impacting our business outlook increases the possibility of asset impairments in 2008. This business outlook is also subject to the risks and uncertainties described at the end of this release.
-- Revenue for 2008 is targeted at approximately $2.165 billion to $2.185 billion. We anticipate Q4 revenue in the range of $560 million to $580 million, unchanged from our most recent outlook.
-- Operating loss for Q4 2008 is targeted to be in the range of $11 million to $18 million. This includes restructuring and related charges of approximately $25 million. Previously, Q4 operating income was targeted in the range of $7 million to $14 million. Diluted loss per share for Q4 is targeted between $0.21 and $0.34 which includes the negative impact of approximately $0.44 from restructuring and related charges. Previously, Q4 diluted earnings per share was targeted between $0.11 to $0.23. Our operating income outlook for Q4 2008 excluding restructuring and related charges is unchanged.
-- Operating income for FY 2008 is targeted to be in the range of $5 million to $12 million. This includes restructuring and related charges incurred in the first three quarters and anticipated in Q4 which combined total $46 million. Previously, 2008 operating income was targeted in the range of $30 million to $37 million including restructuring and related charges of $21 million incurred through the first three quarters of 2008. Our operating income outlook for FY 2008 excluding restructuring and related charges is unchanged.
-- Diluted earnings per share for FY 2008 is targeted between $0.00 and $0.12 which includes the negative impact of $0.83 from restructuring and related charges incurred in the first three quarters and anticipated in Q4. Previously, 2008 diluted earnings per share was targeted between $0.44 and $0.56 which includes the negative impact of approximately $0.39 from restructuring and other charges incurred through the first three quarters. Our earnings per share outlook for Q4 and FY 2008 excluding restructuring and related charges is unchanged.
-- Capital spending is targeted to be approximately $15 million, unchanged from our most recent outlook.
-- The full year tax rate is anticipated to be in the range of 33 percent to 35 percent, absent any one-time tax items that may occur in the future. This is unchanged from our most recent outlook.
-- Depreciation and amortization expense is targeted to be approximately $50 million, unchanged from our most recent outlook.
About Imation Corp.
Imation is a leading global developer and marketer of branded products that enable people to capture, save and enjoy digital information. Our world-class portfolio of digital storage products, audio and video electronics and accessories reaches customers through a powerful global distribution network. Our goal is a company with strong commercial and consumer businesses and continued long-term growth and profitability that creates shareholder value. Imation Corp.'s global brand portfolio, in addition to the Imation brand, includes the Memorex brand, one of the most widely recognized names in the consumer electronics industry, famous for the slogan, "Is it live or is it Memorex?" and the XtremeMac brand. Imation is also the exclusive licensee of the TDK Life on Record brand, one of the world's leading recording media brands. Additional information about Imation is available at http://www.imation.com/.
Risk and Uncertainties
Certain information contained in this press release which does not relate to historical information may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause our actual results in the future to differ materially from our historical results and those presently anticipated or projected. We wish to caution investors not to place undue reliance on any such forward-looking statements. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements to reflect events or circumstances arising after such date. Risk factors include continuing uncertainty in global and regional economic conditions; the volatility of the markets in which we operate; the outcome of any pending or future litigation, including the pending Philips litigation; our ability to successfully defend our intellectual property rights; the possibility that our goodwill or other assets may become impaired; the rate of decline for certain existing products; the competitive pricing environment and its possible impact on profitability and inventory valuations; our ability to meet our revenue growth and cost reduction targets; our ability to successfully integrate our recent acquisitions and achieve the anticipated benefits, including synergies, in a timely manner; our ability to successfully implement our global manufacturing strategy for magnetic data storage products and to realize the benefits expected from the related restructuring; our ability to introduce new offerings in a timely manner either independently or in association with OEMs or other third parties; our ability to efficiently source, warehouse and distribute our products globally; our ability to secure and maintain adequate shelf and display space over time at retailers which conduct semi-annual or annual line reviews; our ability to achieve the expected benefits from our strategic relationships and distribution agreements; foreign currency fluctuations; our ability to secure adequate supply of certain high demand products at acceptable prices; the availability and price of energy and key raw materials or critical components; our ability to successfully manage multiple brands globally; the market acceptance of newly introduced product and service offerings, as well as various factors set forth from time to time in our filings with the Securities and Exchange Commission.
Imation, the Imation logo, Memorex, the Memorex logo, "Is it live or is it Memorex?" and XtremeMac are trademarks of Imation Corp. and its subsidiaries. The TDK Life on Record logo is a trademark of TDK Corporation. All other trademarks are property of their respective owners.
DATASOURCE: Imation Corp.
CONTACT: Brad Allen, Vice President, Corporate Communications and
Investor Relations of Imation Corp., +1-651-704-5818
Web site: http://www.imation.com/