Sale of Color Proofing Business Positions Imation as Pure Data Storage Company
Press release from the issuing company
OAKDALE, Minn.--Oct. 18, 2001--Imation Corp. Chairman and CEO Bill Monahan outlined the company's strategy to focus on profitable growth from its core data storage business, following the announcement that it will sell its color proofing and color software business to Kodak Polychrome Graphics (KPG) for $50 million in cash. (See KPG to Acquire Imation's Color Proofing Business; Business Wire, October 18, 2001.)
"The sale of the color proofing and color software business enables us to focus on our core data storage business - one with annual revenues of nearly $900 million. Removable data storage is a critical part of the overall storage infrastructure and we are extremely well positioned to build on our strengths. Imation has leading technology and deep intellectual property, global market coverage, key industry alliances and partnerships, a strong balance sheet, the broadest portfolio of offerings and an experienced team ready to leverage our growth opportunities,'' Monahan said.
"Last year, we began a comprehensive review of strategic alternatives, undertaken with the assistance of Goldman Sachs. We have completed that analysis. This transaction is a major step in implementing our strategy focused on profitable growth in our core data storage segment.''
"Leadership and strategy are about making choices. The sale of our color proofing and color software operations is a positive step for our employees, customers and shareholders. Employees working in the color business will have the opportunity to participate in a company that is singularly focused on the graphic arts industry. Color proofing customers will benefit from a broader and deeper range of products and services from which to choose. Upon completion of the sale, Imation gains increased focus, building shareholder value from our core strengths and opportunities in the data storage market. We will also resume the company's stock repurchase program as we continue to manage our remaining non-data storage businesses to optimize value for our customers, shareholders and employees,'' he concluded.
Following the release of financial results for the third quarter 2001 on Monday, October 22nd, Imation will host a live teleconference scheduled to begin at 9:00 a.m. Central Time. The teleconference will be webcast live on a listen-only basis at www.imation.com or www.streetevents.com. A replay of this webcast will be available at either of these websites through Friday, October 26th. A taped replay of the teleconference will also be available beginning at 11:00 a.m. Central Time October 22nd until 5:00 p.m. Central Time on Wednesday, October 24th by dialing 800-633-8284, reservation number 19846840. All remarks made during the teleconference will be current at the time of the call but the replay will not be updated to reflect any subsequent material developments.
Imation and the Data Storage Industry
Imation has long been a part of the digital wave transforming industries and shaping markets. This wave is changing how businesses and individuals store and manage digital information. Demand for digital data storage capacity has been growing at a steadily increasing rate over the past decade. Analysts estimate the market for all forms of data storage exceeds $67 billion, growing over twelve percent annually. Emerging new applications hold great promise for accelerating this growth rate even further. As more and more non-data applications migrate to a digital format - from photography and multi-media to music and entertainment -- the requirements for convenient, cost-effective digital storage are potentially enormous. In addition, enhanced data security through backup, archiving and retrieval is increasingly recognized as critical for every organization where information is a vital asset.
Imation is one of the largest participants in the $6 billion removable data storage market with the broadest product line available from a single manufacturer. Removable data storage media, with capacities ranging from megabytes to terabytes, offer a compelling lower cost alternative to fixed storage. Imation's tape cartridges, diskettes and optical products span this broad range as key ingredients in much of the world's storage infrastructure found in corporate data centers, across storage networks, within small businesses, in the hands and on the desks of home users. Data storage tape cartridges, where Imation holds significant market positions, remains the most cost effective and reliable solution for data security, disaster recovery, back-up and archival applications whether in the data center or on a network. Consumers use Imation's broad range of optical media to store photos, data, music and more. Imation, independent from any particular hardware vendor or platform, brings its expertise in data storage consulting services. The company's on-site laboratory provides interoperability testing and performance optimization to help customers maximize efficiency and minimize cost for a multitude of storage environments, including multi-vendor storage area networks (SAN).
Imation continues to pioneer new tape, optical and diskette technologies. The Company's current work in leading-edge technologies such as two and three layer metal particulate coating (MP2 and MP3), magneto-optical technologies, holographic storage, servo-writing and its leadership in cartridge design and fabrication, are built on more than a 50 year experience in research and development, manufacturing and marketing of removable data storage products. Imation has a solid market presence in more than 60 countries with strong brand recognition built on a broad product and service line delivered with consistently high quality.
Sale of Color Proofing and Color Software Businesses
Kodak Polychrome Graphics (KPG) announced that it has reached a definitive agreement with Imation to acquire Imation's worldwide color proofing and color software businesses, including its Matchprint(TM) line of color proofing systems, for a total of $50 million in cash. Approximately 500 employees are expected to transfer as part of the sale, which includes the portion of the company's Weatherford, Oklahoma manufacturing plant associated with color proofing.
For the year ended December 31, 2000 and the first six months of 2001, the Color Technologies segment reported revenues of $273.1 million and $111.6 million respectively. For the same periods, the segment reported operating income of $19.9 million and $7.9 million respectively. The Color Technologies segment is made up of the color proofing and color software businesses being sold to KPG and two smaller businesses, specialty papers and video disc replication, which are not being sold to KPG. Those two businesses contributed approximately $50 million in revenues in fiscal 2000.
The transaction is expected to close by the end of the fourth quarter of 2001 following expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, receipt of other applicable antitrust approvals and customary closing conditions. The company anticipates reporting approximately a breakeven result from the sale after taxes and net of estimated costs of the transaction, but before restructuring. Net after-tax cash proceeds are expected to range between $40 and $45 million. Imation also expects material restructuring charges to be taken as a result of the sale and the implementation of its data storage focused strategy. The amount and timing of these charges are not certain at this time, but are expected to be known by year-end.
The Company intends to use its cash position and sale proceeds to continue investment in the core data storage business and to resume buying back its common stock after it reports third quarter results next week. Imation currently has authorization for the repurchase of up to 3.2 million shares of common stock and has approximately 35.3 million shares outstanding.
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