OAKDALE, Minn.-July 24, 2001-- Imation Corp., a leading supplier of removable data storage media and color management technologies, today reported net income for the second quarter ended June 30, 2001 of $9.9 million, or $0.28 per diluted share, with a 32 percent tax rate, on revenue of $283.4 million. This compares with net income of $13.5 million, or $0.38 per diluted share, with a 22 percent tax rate, on revenue of $307.1 million for the second quarter last year. EPS declined compared to last year by $0.10 due to tax rate changes, lower non-operating income, and foreign currency impacts. Adjusting for the impact of these items, EPS would have increased by $0.07 compared to the prior year. Operating income of $12.9 million for the second quarter of 2001 was at the high end of the Company's estimated range and compares to $13.3 million of operating income in the second quarter last year. Second quarter 2001 operating income and net income were both higher than the first quarter of 2001 despite lower revenues. "Our sound business principles enabled us to deliver earnings at the high-end of our guidance, maintain a solid gross margin, and generate strong cash flow in spite of the difficult economic conditions. The underlying improvement in the operating performance of the Company is not readily apparent in our earnings comparisons due to last year's lower tax rate, higher non-operating income and the impact of foreign currency translation,'' said Bill Monahan, Imation's chairman and CEO. For the six months ended June 30, 2001, the Company reported net income of $14.8 million, or $0.42 per diluted share, with a 32 percent tax rate, on revenue of $583.3 million compared to net income of $33.6 million, or $0.93 per diluted share, with a 22 percent tax rate, on revenue of $635.7 million before the cumulative effect of accounting change for the corresponding year-ago period. EPS for the six months, excluding special charges, declined by $0.40 compared to the year-ago six months before the cumulative effect of accounting change. This decline resulted from tax rate changes, lower non-operating income and foreign currency impacts. Adjusting for the impact of these items, EPS, excluding special charges, would have increased by $0.02 compared to the year-ago period. Data storage revenue in the second quarter was $206.3 million, or 73 percent of total revenues, and operating income rose to $12.0 million, the highest level of operating income for Data Storage in the past five quarters. Commenting on Data Storage results, CEO Bill Monahan said, "Operating income has increased consistently over the past several quarters as we build a sustainable, profitable data storage business in a difficult economic environment.'' Cash flow from operations for the second quarter was $51.8 million and EBITDA was $24.9 million. Cash increased by $35.6 million during the second quarter, including significant tax benefits, and reached $322.4 million on June 30, 2001. 2001 BUSINESS OUTLOOK The following statements are based on the Company's current outlook: * Full year 2001 revenues are anticipated to be down slightly compared to 2000 revenues of $1,234.9 million and lower than previous guidance of flat to slightly higher; * Research and Development spending is targeted in the range of five to six percent of revenues for the full year; * Sales, General and Administrative (SG&A) spending is estimated to be in the range of 20 percent of revenues for the full year; * Operating income for the full year, excluding special charges, is targeted to grow five to ten percent over 2000 operating income, or in the range of $48 to $51 million; * Non-operating income is estimated below the 2000 amount and below previous guidance of $8 to $10 million due primarily to recent declines in short-term interest rates; * Tax rate for the full year is estimated to be 32 percent compared with 5 percent for full year 2000, resulting in full year earnings per share, excluding special charges, anticipated to be below 2000 even with improvement in operating income; * Capital expenditures for the year are targeted in the range of $45 million; * Depreciation and amortization expense, excluding special charges, is anticipated to be in the range of $50 million.