OAKDALE, Minn. (Oct. 22, 2001) -- Imation Corp. (NYSE:IMN), a leading supplier of removable data storage media, today reported $13.4 million in operating income for the third quarter ended September 30, 2001, driven by the strongest operating income in its data storage segment in eight quarters, and positive data storage revenue growth, both sequentially and year-over-year, as top line trends continued to improve. Commenting on Data Storage results, CEO Bill Monahan said, "We are gaining momentum in our core removable data storage business. Year-over-year volume growth in Data Storage was solidly in double digits in nearly all geographic regions outside the United States. Data Storage operating income increased again in the third quarter on a modest revenue increase. We've made consistent improvements to this business and shown steady quarterly improvement over the past several quarters. We expect to sustain our progress with a singular focus on the data storage industry and the opportunities it affords us. Our full year 2001 operating income expectations for Imation remain within the same 5 to 10 percent growth range, excluding special charges, that we provided a year ago." The Company reported net income for the third quarter ended September 30, 2001 of $10.1 million, or $0.29 per diluted share on revenue of $279.3 million compared with a net loss for last year's third quarter of $33.6 million, or ($0.97) per share on revenue of $290.7 million, including special charges of $61.1 million pre-tax. Operating income of $13.4 million for the third quarter of 2001 was on track with the Company's estimated range for the full year and was over seven times higher than the $1.9 million of operating income before special charges in the third quarter last year. Data Storage operating income rose to $14.3 million, the highest level of operating income for Data Storage in the past eight quarters. Data storage revenue increased in the third quarter compared to both the third quarter last year and this year's second quarter and was $206.6 million, or 74 percent of total revenues. Net income for the nine months ended September 30, 2001 was $24.9 million, or $0.71 per diluted share compared to a net loss of $3.4 million, or $(0.10) per diluted share, for the nine months ended September 30, 2000. On October 18, 2001, the Company announced the intended sale of its color proofing and color software business to Kodak Polychrome Graphics for $50 million in cash, expected to close by the end of the fourth quarter. Net after-tax cash proceeds of the transaction are estimated to range between $40-$45 million. The color business being sold operated at approximately breakeven in the quarter. The Company also announced that it expects material restructuring charges to be taken as a result of the sale and the implementation of a data storage focused strategy, although the amount and timing of these charges are not certain at the present time. Imation expects to provide transition services in association with the sale of its color proofing and color software business to Kodak Polychrome Graphics totaling a minimum of $20 million over a two year period after the closing of the transaction. More detailed information should be available by the end of the year. Commenting on the pending sale of the color business, Bill Monahan said, "Last year, we began a comprehensive review of strategic alternatives, undertaken with the assistance of Goldman Sachs. We have completed that analysis and this transaction is a major step in the implementation of our focused strategy in the data storage industry. Removable data storage is an important part of the data storage infrastructure where it is increasingly recognized as the most cost effective and reliable solution for data security, disaster recovery, back-up and archiving. It has been a very busy time at Imation over the past several months as we worked to complete the strategic review process, conclude negotiations for the sale of the color business, all while keeping our focus to deliver solid operating results. I want to recognize the entire team at Imation for their commitment, professionalism and excellent results." EBITDA for the quarter was $24.9 million and cash was $322.6 million on September 30, 2001. Imation also announced the resumption of its stock repurchase program. The Company has authorization for the repurchase of up to 3.2 million shares of its 35.3 million outstanding common shares. Business Outlook The following statements are based on the Company's current outlook: * Full year 2001 revenues are anticipated to be down approximately 5-7 percent compared to 2000 revenues of $1,234.9 million; * 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, excluding special charges, 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 to be below the 2000 amount and our earlier guidance of $8-$10 million; * 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. * Material restructuring charges are expected as a result of the sale and the implementation of a data storage focused strategy, although the amount and timing of these charges are uncertain at the present time. The Company expects to provide transition services in association with the sale of its color proofing and color software business to Kodak Polychrome Graphics totaling a minimum of $20 million over a two year period after the closing of the transaction.