UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 or
 o
    
    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.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    41-1838504
(I.R.S. Employer
Identification No.)1 Imation Way 
Oakdale, Minnesota
(Address of principal executive offices)
    
    55128
(Zip Code)
 (651) 704-4000
 Not Applicable
 
 þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



IMATION CORP.
TABLE OF CONTENTS
 PAGEPART I
    
    FINANCIAL INFORMATION
    
    
    3ITEM 1.
    
    FINANCIAL STATEMENTSCondensed Consolidated Statements of Operations for the Three Months Ended
March 31, 2010 and 2009
    
    
    3Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2010 and 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
    
    
    16ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    24ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    24PART II
    
    OTHER INFORMATION
    
    
    25ITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    25ITEM 1A.
    
    RISK FACTORS
    
    
    25ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    25ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    25ITEM 4.
    
    (REMOVED AND RESERVED)
    
    
    25ITEM 5.
    
    OTHER INFORMATION
    
    
    25ITEM 6.
    
    EXHIBITS
    
    
    25SIGNATUREEXHIBIT INDEX
  2




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##### 



PART I. FINANCIAL INFORMATION
 
 Financial Statements.
 IMATION CORP.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except for per share amounts)
(Unaudited)
 Three Months EndedMarch 31,2010
    
    
    2009Net revenue
    
    $
    365.8
    
    
    $
    396.5Cost of goods sold
    
    
    304.1
    
    
    
    329.6Gross profit
    
    
    61.7
    
    
    
    66.9Operating expense:Selling, general and administrative
    
    
    53.1
    
    
    
    64.7Research and development
    
    
    4.4
    
    
    
    5.3Restructuring and other
    
    
    4.0
    
    
    
    5.5Total
    
    
    61.5
    
    
    
    75.5Operating income (loss)
    
    
    0.2
    
    
    
    (8.6
    )Other (income) and expense:Interest income
    
    
    (0.2
    )
    
    
    (0.2
    )Interest expense
    
    
    1.1
    
    
    
    0.4Other, net
    
    
    2.9
    
    
    
    7.4Total
    
    
    3.8
    
    
    
    7.6Loss before income taxes
    
    
    (3.6
    )
    
    
    (16.2
    )Income tax benefit
    
    
    (1.1
    )
    
    
    (3.5
    )Loss from continuing operations
    
    
    (2.5
    )
    
    
    (12.7
    )Discontinued operations:(Loss) income from operations of discontinued
businesses, net of income taxes
    
    
    (0.1
    )
    
    
    1.1(Loss) income from discontinued operations
    
    
    (0.1
    )
    
    
    1.1Net loss
    
    $
    (2.6
    )
    
    $
    (11.6
    )(Loss) earnings per common share  basic:Continuing operations
    
    $
    (0.07
    )
    
    $
    (0.34
    )Discontinued operations
    
    
    
    
    
    
    0.03Net loss
    
    
    (0.07
    )
    
    
    (0.31
    )(Loss) earnings per common share  diluted:Continuing operations
    
    $
    (0.07
    )
    
    $
    (0.34
    )Discontinued operations
    
    
    
    
    
    
    0.03Net loss
    
    
    (0.07
    )
    
    
    (0.31
    )Weighted average shares outstandingBasic
    
    
    37.7
    
    
    
    37.4Diluted
    
    
    37.7
    
    
    
    37.4
  3




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##### 



IMATION CORP.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In millions)
 (Unaudited)
 March 31,
    
    
    December 31,2010
    
    
    2009AssetsCurrent assetsCash and cash equivalents
    
    $
    224.2
    
    
    $
    163.4Accounts receivable, net
    
    
    249.7
    
    
    
    314.9Inventories
    
    
    214.0
    
    
    
    235.7Other current assets
    
    
    160.8
    
    
    
    164.4Total current assets
    
    
    848.7
    
    
    
    878.4Property, plant and equipment, net
    
    
    106.8
    
    
    
    109.8Intangible assets, net
    
    
    336.1
    
    
    
    337.3Goodwill
    
    
    23.5
    
    
    
    23.5Other assets
    
    
    42.9
    
    
    
    44.8Total assets
    
    $
    1,358.0
    
    
    $
    1,393.8Liabilities and Shareholders EquityCurrent liabilitiesAccounts payable
    
    $
    196.0
    
    
    $
    201.4Accrued payroll
    
    
    11.1
    
    
    
    19.7Other current liabilities
    
    
    134.0
    
    
    
    150.8Total current liabilities
    
    
    341.1
    
    
    
    371.9Other liabilities
    
    
    93.7
    
    
    
    94.7Total liabilities
    
    
    434.8
    
    
    
    466.6Shareholders equity
    
    
    923.2
    
    
    
    927.2Total liabilities and shareholders equity
    
    $
    1,358.0
    
    
    $
    1,393.8
  4




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##### 



IMATION CORP.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (In millions)  (Unaudited)
 Three Months EndedMarch 31,2010
    
    
    2009Cash Flows from Operating Activities:Net loss
    
    $
    (2.6
    )
    
    $
    (11.6
    )Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    4.7
    
    
    
    4.8Amortization
    
    
    5.8
    
    
    
    5.9Deferred income taxes
    
    
    2.6
    
    
    
    (0.6
    )Stock-based compensation
    
    
    1.7
    
    
    
    1.8Note receivable reserve
    
    
    
    
    
    
    4.0Other
    
    
    2.0
    
    
    
    1.2Changes in operating assets and liabilities:Accounts receivable
    
    
    60.1
    
    
    
    61.4Inventories
    
    
    18.9
    
    
    
    32.8Other assets
    
    
    (12.7
    )
    
    
    (4.5
    )Accounts payable
    
    
    (3.9
    )
    
    
    (58.7
    )Accrued payroll and other liabilities
    
    
    (11.0
    )
    
    
    (20.8
    )Restricted cash
    
    
    2.8
    
    
    
    Net cash provided by operating activities
    
    
    68.4
    
    
    
    15.7Cash Flows from Investing Activities:Capital expenditures
    
    
    (2.2
    )
    
    
    (5.4
    )License agreement payment
    
    
    (5.0
    )
    
    
    Proceeds from sale of assets
    
    
    0.1
    
    
    
    0.7Net cash used in investing activities
    
    
    (7.1
    )
    
    
    (4.7
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (0.5
    )
    
    
    (4.6
    )Net change in cash and cash equivalents
    
    
    60.8
    
    
    
    6.4Cash and cash equivalents  beginning of period
    
    
    163.4
    
    
    
    96.6Cash and cash equivalents  end of period
    
    $
    224.2
    
    
    $
    103.0
  5




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##### 



IMATION CORP.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)
 Note 1  Basis of Presentation
     Recently Adopted Accounting Pronouncements
  Note 2  Earnings (loss) per common share
  6




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##### 



Three Months EndedMarch 31,(In millions)
    
    2010
    
    
    2009Numerator:Loss from continuing operations
    
    $
    (2.5
    )
    
    $
    (12.7
    )(Loss) income from discontinued operations
    
    
    (0.1
    )
    
    
    1.1Net loss
    
    $
    (2.6
    )
    
    $
    (11.6
    )Denominator:Weighted average number of common stock outstanding during the period
    
    
    37.7
    
    
    
    37.4Dilutive effect of stock-based compensation plans
    
    
    
    
    
    
    Weighted average number of diluted shares outstanding during the period
    
    
    37.7
    
    
    
    37.4Basic (loss) earnings per common share:Continuing operations
    
    $
    (0.07
    )
    
    $
    (0.34
    )Discontinued operations
    
    
    (0.00
    )
    
    
    0.03Net loss
    
    
    (0.07
    )
    
    
    (0.31
    )Diluted (loss) earnings per common share:Continuing operations
    
    $
    (0.07
    )
    
    $
    (0.34
    )Discontinued operations
    
    
    (0.00
    )
    
    
    0.03Net loss
    
    
    (0.07
    )
    
    
    (0.31
    )Anti-dilutive options excluded from calculation
    
    
    4.6
    
    
    
    4.3
  7




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##### 



Note 3  Supplemental Balance Sheet Information
 March 31,
    
    
    December 31,(In millions)
    
    2010
    
    
    2009(Unaudited)Accounts ReceivableAccounts receivable
    
    $
    273.9
    
    
    $
    343.5Less reserves and allowances*
    
    
    (24.2
    )
    
    
    (28.6
    )Accounts receivable, net
    
    $
    249.7
    
    
    $
    314.9InventoriesFinished goods
    
    $
    191.4
    
    
    $
    210.4Work in process
    
    
    7.5
    
    
    
    8.9Raw materials and supplies
    
    
    15.1
    
    
    
    16.4Total inventories
    
    $
    214.0
    
    
    $
    235.7Other Current AssetsDeferred income taxes
    
    $
    39.4
    
    
    $
    42.7Restricted cash
    
    
    16.1
    
    
    
    19.1Assets held for sale
    
    
    7.2
    
    
    
    7.2Taxes receivable
    
    
    44.9
    
    
    
    35.1Other
    
    
    53.2
    
    
    
    60.3Total other current assets
    
    $
    160.8
    
    
    $
    164.4Property, Plant and EquipmentProperty, plant and equipment
    
    $
    349.9
    
    
    $
    350.8Less accumulated depreciation
    
    
    (243.1
    )
    
    
    (241.0
    )Property, plant and equipment, net
    
    $
    106.8
    
    
    $
    109.8Other AssetsDeferred income taxes
    
    $
    35.4
    
    
    $
    35.5Other
    
    
    7.5
    
    
    
    9.3Total other assets
    
    $
    42.9
    
    
    $
    44.8Other Current LiabilitiesRebates
    
    $
    54.9
    
    
    $
    66.1Litigation settlement  current
    
    
    8.1
    
    
    
    7.9Employee separation costs
    
    
    3.9
    
    
    
    4.3Value added tax
    
    
    11.2
    
    
    
    12.0Other
    
    
    55.9
    
    
    
    60.5Total other current liabilities
    
    $
    134.0
    
    
    $
    150.8Other LiabilitiesPension
    
    $
    35.6
    
    
    $
    36.3Litigation settlement  long-term
    
    
    22.1
    
    
    
    21.8Deferred income taxes
    
    
    3.0
    
    
    
    3.3Unrecognized tax benefits
    
    
    16.2
    
    
    
    16.0Other
    
    
    16.8
    
    
    
    17.3Total other liabilities
    
    $
    93.7
    
    
    $
    94.7
 
 *
    
    Accounts receivable reserves and allowances include estimated amounts for customer returns,
terms discounts and the inability of certain customers to make the required payment. 8




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##### 



Note 4  Intangible Assets and Goodwill
 Intangible Assets
  Customer(In millions)
    
    Trade Names
    
    
    Software
    
    
    Relationships
    
    
    Other
    
    
    TotalMarch 31, 2010Gross carrying amount
    
    $
    333.0
    
    
    $
    52.2
    
    
    $
    65.0
    
    
    $
    11.6
    
    
    $
    461.8Accumulated amortization
    
    
    (37.2
    )
    
    
    (47.1
    )
    
    
    (36.0
    )
    
    
    (5.4
    )
    
    
    (125.7
    )Intangible assets, net
    
    $
    295.8
    
    
    $
    5.1
    
    
    $
    29.0
    
    
    $
    6.2
    
    
    $
    336.1December 31, 2009Gross carrying amount
    
    $
    333.2
    
    
    $
    62.3
    
    
    $
    65.5
    
    
    $
    6.6
    
    
    $
    467.6Accumulated amortization
    
    
    (34.4
    )
    
    
    (56.8
    )
    
    
    (33.9
    )
    
    
    (5.2
    )
    
    
    (130.3
    )Intangible assets, net
    
    $
    298.8
    
    
    $
    5.5
    
    
    $
    31.6
    
    
    $
    1.4
    
    
    $
    337.3
   Three Months EndedMarch 31,(In millions)
    
    2010
    
    
    2009Amortization expense
    
    $
    5.8
    
    
    $
    5.9
  (In millions)
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014Amortization expense
    
    $
    14.7
    
    
    $
    20.3
    
    
    $
    20.0
    
    
    $
    15.1
    
    
    $
    10.9
 Goodwill
   9




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##### 



Note 5  Comprehensive Income (Loss)
  March 31,
    
    
    December 31,(In millions)
    
    2010
    
    
    2009Cumulative currency translation adjustment
    
    $
    (55.2
    )
    
    $
    (50.4
    )Pension adjustments, net of income tax
    
    
    (18.7
    )
    
    
    (18.8
    )Cash flow hedging and other, net of income tax
    
    
    0.5
    
    
    
    0.3Total accumulated other comprehensive loss
    
    $
    (73.4
    )
    
    $
    (68.9
    )
  Three Months EndedMarch 31,(In millions)
    
    2010
    
    
    2009Net loss
    
    $
    (2.6
    )
    
    $
    (11.6
    )Cumulative currency translation adjustment
    
    
    (4.8
    )
    
    
    (10.4
    )Pension adjustments, net of income taxes
    
    
    0.1
    
    
    
    Cash flow hedging and other, net of income tax
    
    
    0.2
    
    
    
    3.7Total comprehensive loss
    
    $
    (7.1
    )
    
    $
    (18.3
    )
 Note 6  Stock-Based Compensation
   Stock Options
  WeightedStock
    
    
    AverageOptions
    
    
    Exercise PriceOutstanding December 31, 2009
    
    
    4,594,838
    
    
    $
    27.19Granted
    
    
    2,532
    
    
    
    8.91Exercised
    
    
    
    
    
    
    Cancelled
    
    
    (102,731
    )
    
    
    35.02Forefeited
    
    
    (25,379
    )
    
    
    23.82Outstanding March 31, 2010
    
    
    4,469,260
    
    
    $
    27.12
 10




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##### 



2010Volatility
    
    
    42.5
    %Risk-free interest rate
    
    
    2.57
    %Expected life (months)
    
    
    66Dividend yield
    
    
    0.0
    %
  Restricted Stock
  WeightedAverage GrantRestricted
    
    
    Date Fair ValueStock
    
    
    Per ShareNonvested as of December 31, 2009
    
    
    461,702
    
    
    $
    14.84Granted
    
    
    1,340
    
    
    
    8.91Vested
    
    
    (3,831
    )
    
    
    11.14Forfeited
    
    
    (1,587
    )
    
    
    10.19Nonvested as of March 31, 2010
    
    
    457,624
    
    
    $
    14.32
   Note 7  Retirement Plans
 Employer Contributions
  Components of Net Periodic Pension Cost
 United States
    
    
    InternationalThree Months Ended March 31,(In millions)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Service cost
    
    $
    0.4
    
    
    $
    0.8
    
    
    $
    0.2
    
    
    $
    0.2Interest cost
    
    
    1.2
    
    
    
    1.7
    
    
    
    0.6
    
    
    
    0.8Expected return on plan assets
    
    
    (1.5
    )
    
    
    (1.7
    )
    
    
    (0.7
    )
    
    
    (0.8
    )Amortization of net actuarial (gain) loss
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1Amortization of prior service cost (credit)
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    Net periodic pension cost
    
    $
    0.2
    
    
    $
    0.9
    
    
    $
    0.1
    
    
    $
    0.3
 11




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##### 



Note 8  Restructuring and Other Expense
  Three MonthsEnded March 31,(In millions)
    
    2010RestructuringSeverance and severance-related expense
    
    $
    1.6Lease termination costs
    
    
    0.2Total restructuring
    
    
    1.8Other
    
    
    2.2Total
    
    $
    4.0
 2008 Corporate Redesign Restructuring Program
    LeaseSeverance and
    
    
    Termination(In millions)
    
    Related
    
    
    Costs
    
    
    TotalAccrued balance at December 31, 2009
    
    $
    4.3
    
    
    $
    
    
    
    $
    4.3Charges
    
    
    1.6
    
    
    
    0.2
    
    
    
    1.8Usage
    
    
    (1.9
    )
    
    
    (0.2
    )
    
    
    (2.1
    )Currency impacts
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.1
    )Accrued balance at March 31, 2010
    
    $
    3.9
    
    
    $
    
    
    
    $
    3.9
 Other
  Note 9  Income Taxes
   12




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##### 



Note 10  Segment Information
    Three Months EndedMarch 31,(In millions)
    
    2010
    
    
    2009Net RevenueAmericas
    
    $
    136.2
    
    
    $
    152.5Europe
    
    
    101.4
    
    
    
    109.6Asia Pacific
    
    
    102.7
    
    
    
    102.9Electronic Products
    
    
    25.5
    
    
    
    31.5Total
    
    $
    365.8
    
    
    $
    396.5
 13




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##### 



Three Months EndedMarch 31,(In millions)
    
    2010
    
    
    2009Operating Income (Loss)Americas
    
    $
    11.1
    
    
    $
    12.2Europe
    
    
    1.6
    
    
    
    1.1Asia Pacific
    
    
    4.3
    
    
    
    5.7Electronic Products
    
    
    (2.0
    )
    
    
    (3.9
    )Corporate and unallocated
    
    
    (14.8
    )
    
    
    (23.7
    )Total
    
    $
    0.2
    
    
    $
    (8.6
    )
    Three Months EndedMarch 31,(In millions)
    
    2010
    
    
    2009Net RevenueOptical products
    
    $
    157.4
    
    
    $
    181.6Magnetic products
    
    
    103.4
    
    
    
    122.9Flash media products
    
    
    30.9
    
    
    
    20.4Electronic products, accessories and other
    
    
    74.1
    
    
    
    71.6Total
    
    $
    365.8
    
    
    $
    396.5
 Note 11  Fair Value Measurements
   Assets and Liabilities that are Measured at Fair Value on a Recurring Basis:
     14




---



##### 



March 31, 2010
    
    
    December 31, 2009(In millions)
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Derivative assetsForeign currency option contracts
    
    $
    
    
    
    $
    0.6
    
    
    $
    
    
    
    $
    
    
    
    $
    0.9
    
    
    $
    Foreign currency forward contracts
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    Derivative liabilitiesForeign currency option contracts
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency forward contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    Total
    
    $
    
    
    
    $
    1.3
    
    
    $
    
    
    
    $
    
    
    
    $
    0.7
    
    
    $
    
 Cash Flow Hedges
   Other Hedges
   March 31, 2010
    
    
    December 31, 2009Fair Value
    
    
    
    
    
    
    Fair ValueOther
    
    
    Other
    
    
    
    
    
    
    OtherNotional
    
    
    Current
    
    
    Current
    
    
    Notional
    
    
    Current
    
    
    Other Current(In millions)
    
    Amount
    
    
    Assets
    
    
    Liabilities
    
    
    Amount
    
    
    Assets
    
    
    LiabilitiesCash flow hedges designated as hedging instruments
    
    $
    70.0
    
    
    $
    1.4
    
    
    $
    (0.1
    )
    
    $
    48.0
    
    
    $
    0.8
    
    
    $
    Other hedges not receiving hedge accounting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88.8
    
    
    
    0.2
    
    
    
    (0.3
    )Total
    
    $
    70.0
    
    
    $
    1.4
    
    
    $
    (0.1
    )
    
    $
    136.8
    
    
    $
    1.0
    
    
    $
    (0.3
    )
 15




---



##### 



Pretax Gain onEffectivePretax Gain
    
    
    Portion of Derivative
    
    
    Pretax LossRecognized in Other
    
    
    Reclassification from
    
    
    Recognized in theComprehensive
    
    
    Accumulated Other
    
    
    CondensedIncome on Effective
    
    
    Comprehensive Income
    
    
    Statement ofPortion of
    
    
    to Cost of Goods
    
    
    Operations in Other(In millions)
    
    Derivative
    
    
    Sold, net
    
    
    Expense, netCash flow hedges designated as hedging instruments
    
    $
    0.7
    
    
    $
    0.1
    
    
    $
    Other hedges not receiving hedge accounting
    
    
    
    
    
    
    
    
    
    
    (0.9
    )Total
    
    $
    0.7
    
    
    $
    0.1
    
    
    $
    (0.9
    )
  Pretax Gain onEffectivePretax Gain
    
    
    Portion of Derivative
    
    
    Pretax LossRecognized in Other
    
    
    Reclassification from
    
    
    Recognized in theComprehensive
    
    
    Accumulated Other
    
    
    CondensedIncome on Effective
    
    
    Comprehensive Income
    
    
    Statement ofPortion of
    
    
    to Cost of Goods
    
    
    Operations in Other(In millions)
    
    Derivative
    
    
    Sold, net
    
    
    Expense, netCash flow hedges designated as hedging instruments
    
    $
    3.0
    
    
    $
    0.8
    
    
    $
    Other hedges not receiving hedge accounting
    
    
    
    
    
    
    
    
    
    
    (0.7
    )Total
    
    $
    3.0
    
    
    $
    0.8
    
    
    $
    (0.7
    )
 Note 12  Litigation, Commitments and Contingencies
   
 Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
  16




---



##### 



Factors Affecting Comparability of our Financial Results
 Discontinued Operations
  Executive Summary
 Consolidated Results of Operations for the Three Months Ended March 31, 2010
 
    
    Net revenue from continuing operations of $365.8 million for the three months ended
March 31, 2010 was down 7.7 percent compared with $396.5 million in the same period last
year.
    
    Operating income was $0.2 million for the three months ended March 31, 2010, compared
with operating loss of $8.6 million in the same period last year.
    
    Diluted loss per share from continuing operations was $0.07 for the three months ended
March 31, 2010, compared with diluted loss per share from continuing operations of $0.34
for the same period last year.
 Cash Flow/Financial Condition for the Three Months Ended March 31, 2010
 
    
    Cash and cash equivalents totaled $224.2 million as of March 31, 2010, compared with
$163.4 million at December 31, 2009.
    
    Cash flow provided by operating activities was $68.4 million for the three months ended
March 31, 2009, compared with $15.7 million in the same period last year.
 Results of Operations
 Net Revenue
 Three Months Ended March 31,
    
    
    Percent(Dollars in millions)
    
    2010
    
    
    2009
    
    
    ChangeNet revenue
    
    $
    365.8
    
    
    $
    396.5
    
    
    
    -7.7
    %
  Gross Profit
 Three Months Ended March 31,
    
    
    Percent(Dollars in millions)
    
    2010
    
    
    2009
    
    
    ChangeGross profit
    
    $
    61.7
    
    
    $
    66.9
    
    
    
    -7.8
    %Gross margin
    
    
    16.9
    %
    
    
    16.9
    %
  Selling, General and Administrative (SG&A)
 Three Months Ended March 31,
    
    
    Percent(Dollars in millions)
    
    2010
    
    
    2009
    
    
    ChangeSelling, general and administrative
    
    $
    53.1
    
    
    $
    64.7
    
    
    
    -17.9
    %As a percent of revenue
    
    
    14.5
    %
    
    
    16.3
    %
  17




---



##### 



Research and Development (R&D)
 Three Months EndedMarch 31,
    
    
    Percent(Dollars in millions)
    
    2010
    
    
    2009
    
    
    ChangeResearch and development
    
    $
    4.4
    
    
    $
    5.3
    
    
    
    -17.0
    %As a percent of revenue
    
    
    1.2
    %
    
    
    1.3
    %
  Restructuring and Other
 Three Months EndedMarch 31,
    
    
    Percent(Dollars in millions)
    
    2010
    
    
    2009
    
    
    ChangeRestructuring and other
    
    $
    4.0
    
    
    $
    5.5
    
    
    
    -27.3
    %As a percent of revenue
    
    
    1.1
    %
    
    
    1.4
    %
   Operating
Income (Loss)
 Three Months EndedMarch 31,
    
    
    Percent(Dollars in millions)
    
    2010
    
    
    2009
    
    
    ChangeOperating income (loss)
    
    $
    0.2
    
    
    $
    (8.6
    )
    
    
    N/MAs a percent of revenue
    
    
    0.1
    %
    
    
    (2.2)
    %
  Other (Income) and Expense
 Three Months EndedMarch 31,
    
    
    Percent(Dollars in millions)
    
    2010
    
    
    2009
    
    
    ChangeInterest income
    
    $
    (0.2
    )
    
    $
    (0.2
    )
    
    
    0.0
    %Interest expense
    
    
    1.1
    
    
    
    0.4
    
    
    
    175.0
    %Other expense, net
    
    
    2.9
    
    
    
    7.4
    
    
    
    -60.8
    %Total
    
    
    3.8
    
    
    
    7.6As a percent of revenue
    
    
    1.0
    %
    
    
    1.9
    %
  18




---



##### 



Income
Tax Benefit
 Three Months EndedMarch 31,
    
    
    Percent(Dollars in millions)
    
    2010
    
    
    2009
    
    
    ChangeIncome tax benefit
    
    $
    (1.1
    )
    
    $
    (3.5
    )
    
    
    -68.6
    %Effective tax rate
    
    
    30.6
    %
    
    
    21.6
    %
   Segment Results
     Data Storage Media
 Americas
 Three Months EndedMarch 31,
    
    
    Percent(In millions)
    
    2010
    
    
    2009
    
    
    ChangeNet revenue
    
    $
    136.2
    
    
    $
    152.5
    
    
    
    -10.7
    %Operating income
    
    
    11.1
    
    
    
    12.2
    
    
    
    -9.0
    %As a percent of revenue
    
    
    8.1
    %
    
    
    8.0
    %
  19




---



##### 



Asia Pacific (APAC)
 Three Months EndedMarch 31,
    
    
    Percent(In millions)
    
    2010
    
    
    2009
    
    
    ChangeNet revenue
    
    $
    102.7
    
    
    $
    102.9
    
    
    
    -0.2
    %Operating income
    
    
    4.3
    
    
    
    5.7
    
    
    
    -24.6
    %As a percent of revenue
    
    
    4.2
    %
    
    
    5.5
    %
   Europe
 Three Months EndedMarch 31,
    
    
    Percent(In millions)
    
    2010
    
    
    2009
    
    
    ChangeNet revenue
    
    $
    101.4
    
    
    $
    109.6
    
    
    
    -7.5
    %Operating income
    
    
    1.6
    
    
    
    1.1
    
    
    
    45.5
    %As a percent of revenue
    
    
    1.6
    %
    
    
    1.0
    %
   Electronic Products
 Three Months EndedMarch 31,
    
    
    Percent(In millions)
    
    2010
    
    
    2009
    
    
    ChangeNet revenue
    
    $
    25.5
    
    
    $
    31.5
    
    
    
    -19.0
    %Operating income (loss)
    
    
    (2.0
    )
    
    
    (3.9
    )
    
    
    -48.7
    %As a percent of revenue
    
    
    (7.8)
    %
    
    
    (12.4)
    %
   20




---



##### 



Corporate and Unallocated
 Three Months EndedMarch 31,
    
    
    Percent(Dollars In millions)
    
    2010
    
    
    2009
    
    
    ChangeOperating loss
    
    $
    14.8
    
    
    $
    23.7
    
    
    
    -37.6
    %
  Impact of Changes in Foreign Currency Rates
   Quantitative and Qualitative Disclosures about Market Risk
 Financial Position
     21




---



##### 



Liquidity and Capital Resources
 Cash Flows Provided by Operating Activities:
 Three Months EndedMarch 31,2010
    
    
    2009Net (loss) income
    
    $
    (2.6
    )
    
    $
    (11.6
    )Adjustments to reconcile net (loss) income to net cash provided by operating activities:Depreciation and amortization
    
    
    10.5
    
    
    
    10.7Deferred income taxes
    
    
    2.6
    
    
    
    (0.6
    )Stock-based compensation
    
    
    1.7
    
    
    
    1.8Note receivable reserve
    
    
    
    
    
    
    4.0Other
    
    
    2.0
    
    
    
    1.2Changes in operating assets and liabilities, net of effects from acquisitions
    
    
    54.2
    
    
    
    10.2Net cash provided by operating activities
    
    $
    68.4
    
    
    $
    15.7
  Cash Flows Used in Investing Activities:
 Three Months EndedMarch 31,2010
    
    
    2009Capital expenditures
    
    $
    (2.2
    )
    
    $
    (5.4
    )License agreement payment
    
    
    (5.0
    )
    
    
    Proceeds from sale of assets
    
    
    0.1
    
    
    
    0.7Net cash used in investing activities
    
    $
    (7.1
    )
    
    $
    (4.7
    )
    22




---



##### 



Contractual Obligations
  Fair Value Measurements
  Critical Accounting Policies and Estimates
  Recent Accounting Pronouncements
  Forward-Looking Statements and Risk Factors
   23




---



##### 



Quantitative and Qualitative Disclosures about Market Risk.
 Quantitative and Qualitative Disclosures about Market Risk
  
 Controls and Procedures .
   24




---



##### 



PART II. OTHER INFORMATION
 
 Legal Proceedings
   
 Risk Factors
  
 Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Defaults Upon Senior Securities
  
 Removed and Reserved
 
 Other Information.
  
 Exhibits.
  ExhibitNumber
    
    
    Description of Exhibit31.1
    
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 25




---



##### 



SIGNATURE
  Imation Corp.Date: May 5, 2010
    /s/ Paul R. ZellerPaul R. ZellerSenior Vice President and Chief Financial Officer

(duly authorized officer and principal financial
officer) 26




---



##### 



EXHIBIT INDEX
  ExhibitNumber
    
    Description of Exhibit31.1
    
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 27