##### Table of Contents



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, 2009
 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
    
    41-1838504(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)1 Imation WayOakdale, Minnesota
    
    55128(Address of principal executive offices)
    
    (Zip Code)
 (651) 704-4000
 Not Applicable
 
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    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, 2009 and 2008
    
    
    3Condensed Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Report of Independent Registered Public Accounting Firm
    
    
    16ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    17ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    25ITEM 4. CONTROLS AND PROCEDURES
    
    
    25PART II OTHER INFORMATION
    
    
    26ITEM 1. LEGAL PROCEEDINGS
    
    
    26ITEM 1A. RISK FACTORS
    
    
    27ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    27ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    27ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    28ITEM 5. OTHER INFORMATION
    
    
    28ITEM 6. EXHIBITS
    
    
    28SIGNATUREEXHIBIT INDEXEX-10.2EX-15.1EX-31.1EX-31.2EX-32.1EX-32.2
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Financial Statements.
 IMATION CORP.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In millions, except per share amounts)
 (Unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008Net revenue
    
    $
    426.2
    
    
    $
    530.9Cost of goods sold
    
    
    357.2
    
    
    
    432.2Gross profit
    
    
    69.0
    
    
    
    98.7Selling, general and administrative expense
    
    
    65.6
    
    
    
    71.9Research and development expense
    
    
    5.3
    
    
    
    6.6Restructuring and other expense
    
    
    5.5
    
    
    
    0.7Total
    
    
    76.4
    
    
    
    79.2Operating (loss) income
    
    
    (7.4
    )
    
    
    19.5Other (income) and expenseInterest income
    
    
    (0.2
    )
    
    
    (0.9
    )Interest expense
    
    
    0.4
    
    
    
    0.7Other expense, net
    
    
    7.6
    
    
    
    1.4Total
    
    
    7.8
    
    
    
    1.2(Loss) income before income taxes
    
    
    (15.2
    )
    
    
    18.3Income tax (benefit) provision
    
    
    (3.6
    )
    
    
    7.3Net (loss) income
    
    $
    (11.6
    )
    
    $
    11.0(Loss) earnings per common shareBasic
    
    $
    (0.31
    )
    
    $
    0.29Diluted
    
    
    (0.31
    )
    
    
    0.29Weighted average shares outstandingBasic
    
    
    37.4
    
    
    
    37.7Diluted
    
    
    37.4
    
    
    
    37.8Cash dividend paid per common share
    
    $
    
    
    
    $
    0.16
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IMATION CORP.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In millions)
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    103.0
    
    
    $
    96.6Accounts receivable, net
    
    
    307.1
    
    
    
    378.3Inventories, net
    
    
    324.0
    
    
    
    363.2Other current assets
    
    
    142.7
    
    
    
    138.1Total current assets
    
    
    876.8
    
    
    
    976.2Property, plant and equipment, net
    
    
    121.3
    
    
    
    122.4Intangible assets, net
    
    
    350.6
    
    
    
    357.0Goodwill
    
    
    23.5
    
    
    
    23.5Other assets
    
    
    38.5
    
    
    
    43.2Total assets
    
    $
    1,410.7
    
    
    $
    1,522.3LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    230.0
    
    
    $
    296.1Accrued payroll
    
    
    13.3
    
    
    
    12.5Other current liabilities
    
    
    165.7
    
    
    
    195.0Total current liabilities
    
    
    409.0
    
    
    
    503.6Other liabilities
    
    
    72.7
    
    
    
    74.1Commitments and contingenciesShareholders equity
    
    
    929.0
    
    
    
    944.6Total liabilities and shareholders equity
    
    $
    1,410.7
    
    
    $
    1,522.3
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IMATION CORP.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In millions) 
(Unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008Cash Flows from Operating Activities:Net (loss) income
    
    $
    (11.6
    )
    
    $
    11.0Adjustments to reconcile net income to net cash provided by operatingDepreciation and amortization
    
    
    10.7
    
    
    
    12.6Deferred income taxes
    
    
    (0.6
    )
    
    
    1.9Stock-based compensation
    
    
    1.8
    
    
    
    2.6TDK post-closing purchase price adjustment
    
    
    
    
    
    
    (2.3
    )Note receivable reserve
    
    
    4.0
    
    
    
    Other
    
    
    1.2
    
    
    
    1.2Changes in operating assets and liabilities:Accounts receivable
    
    
    61.4
    
    
    
    107.6Inventories
    
    
    32.8
    
    
    
    5.7Other assets
    
    
    (4.5
    )
    
    
    (5.8
    )Accounts payable
    
    
    (58.7
    )
    
    
    (75.0
    )Accrued payroll and other liabilities
    
    
    (20.8
    )
    
    
    (26.7
    )Net cash provided by operating activities
    
    
    15.7
    
    
    
    32.8Cash Flows from Investing Activities:Capital expenditures
    
    
    (5.4
    )
    
    
    (2.4
    )Acquisition of minority interest
    
    
    
    
    
    
    (8.0
    )Other, net
    
    
    0.7
    
    
    
    1.0Net cash used in provided by investing activities
    
    
    (4.7
    )
    
    
    (9.4
    )Cash Flows from Financing Activities:Debt repayment
    
    
    
    
    
    
    (31.3
    )Purchase of treasury stock
    
    
    
    
    
    
    (19.4
    )Exercise of stock options
    
    
    
    
    
    
    0.1Dividend payments
    
    
    
    
    
    
    (6.0
    )Net cash used in financing activities
    
    
    
    
    
    
    (56.6
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (4.6
    )
    
    
    3.2Net change in cash and cash equivalents
    
    
    6.4
    
    
    
    (30.0
    )Cash and cash equivalents  beginning of period
    
    
    96.6
    
    
    
    135.5Cash and cash equivalents  end of period
    
    $
    103.0
    
    
    $
    105.5
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IMATION CORP.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 Note 1  Basis of Presentation
    Note 2  Weighted Average Basic and Diluted Shares Outstanding
  Three Months EndedMarch 31,(In millions)
    
    2009
    
    
    2008Weighted average number of shares outstanding during the period
    
    
    37.4
    
    
    
    37.7Dilutive effect of stock-based compensation plans
    
    
    
    
    
    
    0.1Weighted average number of diluted shares outstanding during the period
    
    
    37.4
    
    
    
    37.8
  Note 3  Supplemental Balance Sheet Information
 March 31,
    
    
    December 31,(In millions)
    
    2009
    
    
    2008(Unaudited)Accounts ReceivableAccounts receivable
    
    $
    339.1
    
    
    $
    414.9Less allowances
    
    
    (32.0
    )
    
    
    (36.6
    )Accounts receivable, net
    
    $
    307.1
    
    
    $
    378.3InventoriesFinished goods
    
    $
    293.3
    
    
    $
    337.1Work in process
    
    
    20.2
    
    
    
    17.1Raw materials and supplies
    
    
    10.5
    
    
    
    9.0Total inventories, net
    
    $
    324.0
    
    
    $
    363.2
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##### Table of Contents



March 31,
    
    
    December 31,(In millions)
    
    2009
    
    
    2008(Unaudited)Other Current AssetsDeferred income taxes
    
    $
    50.3
    
    
    $
    51.5Assets held for sale (1)
    
    
    22.7
    
    
    
    22.5Other
    
    
    69.7
    
    
    
    64.1Total other current assets
    
    $
    142.7
    
    
    $
    138.1Property, Plant and EquipmentProperty, plant and equipment
    
    $
    354.9
    
    
    $
    427.4Less accumulated depreciation
    
    
    (233.6
    )
    
    
    (305.0
    )Property, plant and equipment, net
    
    $
    121.3
    
    
    $
    122.4Other AssetsDeferred income taxes
    
    $
    30.5
    
    
    $
    31.4Other
    
    
    8.0
    
    
    
    11.8Total other assets
    
    $
    38.5
    
    
    $
    43.2Other Current LiabilitiesRebates
    
    $
    66.9
    
    
    $
    75.6Employee separation costs
    
    
    5.7
    
    
    
    14.5Income taxes
    
    
    
    
    
    
    5.5Other
    
    
    93.1
    
    
    
    99.4Total other current liabilities
    
    $
    165.7
    
    
    $
    195.0Other LiabilitiesPension
    
    $
    49.8
    
    
    $
    49.0Deferred income taxes
    
    
    3.9
    
    
    
    4.2Other
    
    
    19.0
    
    
    
    20.9Total other liabilities
    
    $
    72.7
    
    
    $
    74.1
 
 (1)
    
    As part of our restructuring programs, we ended operations and exited our Anaheim,
California distribution center as well as our Camarillo, California manufacturing facility, which
are being actively marketed for sale. We met the plan of sale criteria in Statement of Financial
Accounting Standard (SFAS) No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets.
Accordingly, the book value of the building and property, which is less than the estimated net
realizable value, was transferred in Q3 2008 into other current assets, and is no longer being
depreciated. Note 4  Intangible Assets and Goodwill
  Customer(In millions)
    
    Trade Names
    
    
    Software
    
    
    Relationships
    
    
    Other
    
    
    TotalMarch 31, 2009Cost
    
    $
    332.9
    
    
    $
    59.5
    
    
    $
    62.2
    
    
    $
    8.0
    
    
    $
    462.6Accumulated amortization
    
    
    (26.1
    )
    
    
    (54.5
    )
    
    
    (25.0
    )
    
    
    (6.4
    )
    
    
    (112.0
    )Net
    
    $
    306.8
    
    
    $
    5.0
    
    
    $
    37.2
    
    
    $
    1.6
    
    
    $
    350.6December 31, 2008Cost
    
    $
    333.1
    
    
    $
    56.9
    
    
    $
    62.9
    
    
    $
    8.1
    
    
    $
    461.0Accumulated amortization
    
    
    (23.2
    )
    
    
    (51.9
    )
    
    
    (22.7
    )
    
    
    (6.2
    )
    
    
    (104.0
    )Net
    
    $
    309.9
    
    
    $
    5.0
    
    
    $
    40.2
    
    
    $
    1.9
    
    
    $
    357.0
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Note 5  Comprehensive Income (Loss)
  March 31,
    
    
    December 31,(In millions)
    
    2009
    
    
    2008Cumulative currency translation adjustment
    
    $
    (65.3
    )
    
    $
    (54.9
    )Pension adjustments, net of income tax
    
    
    (28.5
    )
    
    
    (28.6
    )Cash flow hedging and other, net of income tax
    
    
    2.2
    
    
    
    (1.5
    )Total accumulated other comprehensive loss
    
    $
    (91.6
    )
    
    $
    (85.0
    )Comprehensive income consisted of the following:Three Months EndedMarch 31,(In millions)
    
    2009
    
    
    2008Net (loss) income
    
    $
    (11.6
    )
    
    $
    11.0Cumulative currency translation adjustment
    
    
    (10.4
    )
    
    
    15.4Cash flow hedging and other, net of income tax
    
    
    3.7
    
    
    
    (4.1
    )Total comprehensive (loss) income
    
    $
    (18.3
    )
    
    $
    22.3
 Note 6  Stock-Based Compensation
   Stock Options
  WeightedStock
    
    
    AverageOptions
    
    
    Exercise PriceOutstanding December 31, 2008
    
    
    4,103,756
    
    
    $
    32.09Granted
    
    
    16,000
    
    
    
    9.64Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (158,285
    )
    
    
    28.95Outstanding March 31, 2009
    
    
    3,961,471
    
    
    $
    32.02Exercisable as of March 31, 2009
    
    
    2,289,415
    
    
    $
    34.25
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Note 7  Retirement Plans
 Employer Contributions
  Components of Net Periodic Pension Cost
 United States
    
    
    InternationalThree Months Ended March 31,(In millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Service cost
    
    $
    0.8
    
    
    $
    1.6
    
    
    $
    0.2
    
    
    $
    0.2Interest cost
    
    
    1.7
    
    
    
    1.8
    
    
    
    0.8
    
    
    
    0.9Expected return on plan assets
    
    
    (1.7
    )
    
    
    (2.2
    )
    
    
    (0.8
    )
    
    
    (1.0
    )Amortization of unrecognized items
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    Net periodic pension cost
    
    $
    0.9
    
    
    $
    1.3
    
    
    $
    0.3
    
    
    $
    0.1
 Note 8  Restructuring and Other Expense
  (In millions)
    
    AmountRestructuringSeverance and severance-related expense
    
    $
    4.4Lease termination costs
    
    
    0.9Total restructuring
    
    
    5.3Other
    
    
    0.2Total
    
    $
    5.5
   BalanceBalance as of
    
    
    
    
    
    
    
    
    
    
    
    
    
    as ofDecember 31,
    
    Additional
    
    Currency
    
    
    
    
    
    March 31,(In millions)
    
    2008
    
    Charges
    
    Impacts
    
    Usage
    
    2009Severance and severance related
    
    $
    3.9
    
    
    $
    4.4
    
    
    $
    0.2
    
    
    $
    (2.8
    )
    
    $
    5.7Lease termination costs
    
    
    0.5
    
    
    
    0.9
    
    
    
    
    
    
    
    (0.1
    )
    
    
    1.3
  Initial
    
    
    
    
    
    
    
    
    
    
    
    
    
    BalancePeriod
    
    
    
    
    
    
    
    
    
    
    
    
    
    as ofProgram
    
    Additional
    
    Currency
    
    Cumulative
    
    March 31,(In millions)
    
    Amounts
    
    Charges
    
    Impacts
    
    Usage
    
    2009Severance and severance related
    
    $
    4.9
    
    
    $
    4.4
    
    
    $
    0.2
    
    
    $
    (3.8
    )
    
    $
    5.7Lease termination costs
    
    
    0.5
    
    
    
    0.9
    
    
    
    
    
    
    
    (0.1
    )
    
    
    1.3
 9




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InitialPeriod
    
    
    
    
    
    
    
    
    
    Balance as ofHeadcount
    
    
    
    
    
    Cumulative
    
    March 31,Amounts
    
    Additions
    
    Reductions
    
    2009Total employees affected
    
    
    203
    
    
    
    20
    
    
    
    (157
    )
    
    
    66
 Note 9  Taxes
     Note 10  Segment Information
    Three Months EndedMarch 31,(In millions)
    
    2009
    
    
    2008Net RevenueAmericas
    
    $
    156.5
    
    
    $
    214.7Europe
    
    
    135.3
    
    
    
    176.1Asia Pacific
    
    
    102.9
    
    
    
    114.3Electronic Products
    
    
    31.5
    
    
    
    25.8Total
    
    $
    426.2
    
    
    $
    530.9
 10




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Three Months EndedMarch 31,(In millions)
    
    2009
    
    
    2008Operating Income (Loss)Americas
    
    $
    12.0
    
    
    $
    23.8Europe
    
    
    1.7
    
    
    
    5.7Asia Pacific
    
    
    5.7
    
    
    
    7.7Electronic Products
    
    
    (3.9
    )
    
    
    (2.7
    )Corporate and unallocated
    
    
    (22.9
    )
    
    
    (15.0
    )Total
    
    $
    (7.4
    )
    
    $
    19.5
   Three Months EndedMarch 31,(In millions)
    
    2009
    
    
    2008Net RevenueOptical products
    
    $
    211.3
    
    
    $
    261.6Magnetic products
    
    
    122.9
    
    
    
    178.1Flash media products
    
    
    20.4
    
    
    
    26.9Electronic products, accessories and other
    
    
    71.6
    
    
    
    64.3Total
    
    $
    426.2
    
    
    $
    530.9
 Note 11  Derivative Financial Instruments
 Disclosure About Derivative Instruments
and Hedging Activities  An Amendment of FASB Statement 133,
   Cash Flow Hedges
   11




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Other Hedges
   Fair ValueOtherNotional
    
    
    Current
    
    
    Other Current(In millions)
    
    Amount
    
    
    Assets
    
    
    LiabilitiesCash flow hedges designated as hedging instruments
    
    $
    371.6
    
    
    $
    4.9
    
    
    $
    (0.3
    )Other hedges not receiving hedge accounting
    
    
    135.5
    
    
    
    0.5
    
    
    
    (0.9
    )Total
    
    $
    507.1
    
    
    $
    5.4
    
    
    $
    (1.2
    )
  Pretax Gain onPretax Gain
    
    
    Effective Portion ofRecognized in
    
    
    Derivative
    
    
    Pretax LossOther
    
    
    Reclassification from
    
    
    Recognized in theComprehensive
    
    
    Accumulated Other
    
    
    CondensedIncome on
    
    
    Comprehensive
    
    
    Statement ofEffective Portion
    
    
    Income to Cost of
    
    
    Operations in Other(In millions)
    
    of Derivative
    
    
    Goods Sold, net
    
    
    Expense, netCash flow hedges designated as hedging instruments
    
    $
    3.0
    
    
    $
    0.8
    
    
    $
    Other hedges not receiving hedge accounting
    
    
    
    
    
    
    
    
    
    
    0.7Total
    
    $
    3.0
    
    
    $
    0.8
    
    
    $
    0.7
 Note 12  Fair Value Measurements
 Fair value of financial instruments
 Fair Value Measurements
  Assets and Liabilities that are Measured at Fair Value on a Recurring Basis:
   12




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Quoted prices inactive markets
    
    
    Significant otherfor identical
    
    
    observable
    
    
    UnobservableMarch 31,
    
    
    assets
    
    
    inputs
    
    
    inputs(In millions)
    
    2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative assets
    
    
    5.4
    
    
    
    5.4
    
    
    
    
    
    
    
    Derivative liabilities
    
    
    (1.2
    )
    
    
    (1.2
    )
    
    
    
    
    
    
    Total
    
    $
    4.2
    
    
    $
    4.2
    
    
    $
    
    
    
    $
    
 Note 13  Litigation, Commitments and Contingencies
 Accounting for
Contingencies
  Philips
      13




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SanDisk
     Note 14  Recently Issued Accounting Pronouncements
 Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly
 14




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Interim Disclosures about Fair Value
of Financial Instruments Disclosures about Fair Value of Financial
Instruments
 Note 15  Review Report of Independent Registered Public Accounting Firm
  15




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      
 16




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##### Table of Contents



Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
     ®
  17




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Executive Summary
 Consolidated Results of Operations for the Three Months Ended March 31, 2009
 
    
    Revenue of $426.2 million for the three months ended March 31, 2009 was down
19.7 percent compared with $530.9 million in the same period last year.
    
    Operating loss of $7.4 million for the three months ended March 31, 2009, compared with
operating income of $19.5 million in the same period last year.
    
    Diluted loss per share was $0.31 for the three months ended March 31, 2009, compared
with diluted earnings per share of $0.29 for the same period last year.
 Cash Flow/Financial Condition for the Three Months Ended March 31, 2009
 
    
    Cash totaled $103.0 million as of March 31, 2009, compared with $96.6 million at
December 31, 2008.
    
    Cash flow provided by operating activities was $15.7 million for the three months ended
March 31, 2009, compared with $32.8 million in the same period last year.
 Results of Operations
 Net Revenue
 Three Months EndedMarch 31,
    
    Percent(In millions)
    
    2009
    
    2008
    
    ChangeNet revenue
    
    $
    426.2
    
    
    $
    530.9
    
    
    
    -19.7
    %
  Gross Profit
 Three Months Ended March 31,
    
    Percent(In millions)
    
    2009
    
    2008
    
    ChangeGross profit
    
    $
    69.0
    
    
    $
    98.7
    
    
    
    -30.1
    %Gross margin
    
    
    16.2
    %
    
    
    18.6
    %
  Selling, General and Administrative (SG&A)
 Three Months Ended March 31,
    
    Percent(In millions)
    
    2009
    
    2008
    
    ChangeSelling, general and administrative
    
    $
    65.6
    
    
    $
    71.9
    
    
    
    -8.8
    %As a percent of revenue
    
    
    15.4
    %
    
    
    13.5
    %
  18




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Research and Development (R&D)
 Three Months EndedMarch 31,
    
    Percent(In millions)
    
    2009
    
    2008
    
    ChangeResearch and development
    
    $
    5.3
    
    
    $
    6.6
    
    
    
    -19.7
    %As a percent of revenue
    
    
    1.2
    %
    
    
    1.2
    %
  Restructuring and Other
 Three Months EndedMarch 31,
    
    Percent(In millions)
    
    2009
    
    2008
    
    ChangeRestructuring and other
    
    $
    5.5
    
    
    $
    0.7
    
    
    
    685.7
    %As a percent of revenue
    
    
    1.3
    %
    
    
    0.1
    %
   Operating (Loss) Income
 Three Months EndedMarch 31,
    
    Percent(In millions)
    
    2009
    
    2008
    
    ChangeOperating (loss) income
    
    $
    (7.4
    )
    
    $
    19.5
    
    
    
    -137.9
    %As a percent of revenue
    
    
    (1.7
    )%
    
    
    3.7
    %
  Other (Income) and Expense
 Three Months EndedMarch 31,
    
    
    Percent(In millions)
    
    2009
    
    
    2008
    
    
    ChangeInterest income
    
    $
    (0.2
    )
    
    $
    (0.9
    )
    
    
    -77.8
    %Interest expense
    
    
    0.4
    
    
    
    0.7
    
    
    
    -42.9
    %Other expense, net
    
    
    7.6
    
    
    
    1.4
    
    
    
    442.9
    %Total
    
    
    7.8
    
    
    
    1.2As a percent of revenue
    
    
    1.8
    %
    
    
    0.2
    %
  19




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Income Tax Provision
 Three Months EndedMarch 31,
    
    Percent(In millions)
    
    2009
    
    2008
    
    ChangeIncome tax (benefit) provision
    
    $
    (3.6
    )
    
    $
    7.3
    
    
    
    -149.3
    %Effective tax rate
    
    
    23.7
    %
    
    
    39.9
    %
  Segment Results
     Data Storage Media
 Americas
 Three Months EndedMarch 31,
    
    Percent(In millions)
    
    2009
    
    2008
    
    ChangeNet revenue
    
    $
    156.5
    
    
    $
    214.7
    
    
    
    -27.1
    %Operating income
    
    
    12.0
    
    
    
    23.8
    
    
    
    -49.6
    %As a percent of revenue
    
    
    7.7
    %
    
    
    11.1
    %
   20




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##### Table of Contents



Europe
 Three Months EndedMarch 31,
    
    Percent(In millions)
    
    2009
    
    2008
    
    ChangeNet revenue
    
    $
    135.3
    
    
    $
    176.1
    
    
    
    -23.2
    %Operating income
    
    
    1.7
    
    
    
    5.7
    
    
    
    -70.2
    %As a percent of revenue
    
    
    1.3
    %
    
    
    3.2
    %
   Asia Pacific (APAC)
 Three Months EndedMarch 31,
    
    Percent(In millions)
    
    2009
    
    2008
    
    ChangeNet revenue
    
    $
    102.9
    
    
    $
    114.3
    
    
    
    -10.0
    %Operating income
    
    
    5.7
    
    
    
    7.7
    
    
    
    -26.0
    %As a percent of revenue
    
    
    5.5
    %
    
    
    6.7
    %
   Electronic Products
 Three Months EndedMarch 31,
    
    Percent(In millions)
    
    2009
    
    2008
    
    ChangeNet revenue
    
    $
    31.5
    
    
    $
    25.8
    
    
    
    22.1
    %Operating income (loss)
    
    
    (3.9
    )
    
    
    (2.7
    )
    
    
    44.4
    %As a percent of revenue
    
    
    (12.4
    )%
    
    
    (10.5
    )%
   21




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##### Table of Contents



Corporate and Unallocated
 Three Months EndedMarch 31,
    
    Percent(In millions)
    
    2009
    
    2008
    
    ChangeOperating loss
    
    $
    22.9
    
    
    $
    15.0
    
    
    
    52.7
    %
  Impact of Changes in Foreign Currency Rates
   Quantitative and Qualitative Disclosures about Market Risk
 Financial Position
      22




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Liquidity and Capital Resources
 Financial Position
 Cash Flows Provided by Operating Activities:
 Three Months EndedMarch 31,2009
    
    
    2008Net (loss) income
    
    $
    (11.6
    )
    
    $
    11.0Adjustments to reconcile net (loss) income to net cash provided by operating
activities:Depreciation and amortization
    
    
    10.7
    
    
    
    12.6Deferred income taxes
    
    
    (0.6
    )
    
    
    1.9Stock-based compensation
    
    
    1.8
    
    
    
    2.6TDK post-closing purchase price adjustment
    
    
    
    
    
    
    (2.3
    )Note receivable reserve
    
    
    4.0
    
    
    
    Other
    
    
    1.2
    
    
    
    1.2Changes in operating assets and liabilities, net of effects from acquisitions
    
    
    10.2
    
    
    
    5.8Net cash provided by operating activities
    
    $
    15.7
    
    
    $
    32.8
  Cash Flows Used in Investing Activities:
 Three Months EndedMarch 31,2009
    
    
    2008Capital expenditures
    
    $
    (5.4
    )
    
    $
    (2.4
    )Acquisition of minority interest
    
    
    
    
    
    
    (8.0
    )Other, net
    
    
    0.7
    
    
    
    1.0Net cash used in investing activities
    
    $
    (4.7
    )
    
    $
    (9.4
    )
  Cash Flows Used in Financing Activities:
 Three Months EndedMarch 31,2009
    
    
    2008Debt repayment
    
    $
    
    
    
    $
    (31.3
    )Purchase of treasury stock
    
    
    
    
    
    
    (19.4
    )Exercise of stock options
    
    
    
    
    
    
    0.1Dividend payments
    
    
    
    
    
    
    (6.0
    )Net cash used in financing activities
    
    $
    
    
    
    $
    (56.6
    )
   23




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Contractual Obligations
  Fair Value Measurements
  Critical Accounting Policies and Estimates
  Recently Issued Accounting Pronouncements
  24




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##### Table of Contents



Forward-Looking Statements and Risk Factors
  ;
 
 Quantitative and Qualitative Disclosures about Market Risk.
 Quantitative and Qualitative Disclosures about Market Risk
  
 Controls and Procedures .
   25




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Legal Proceedings
 Accounting for Contingencies
  Philips
        26




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##### Table of Contents



SanDisk
     
 Risk Factors
  
 Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Defaults Upon Senior Securities
  27




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##### Table of Contents



Submission of Matters to a Vote of Security Holders.
  
 Other Information.
  
 Exhibits.
  ExhibitNumber
    
    Description of Exhibit10.1
    
    
    Employment Offer Letter from Imation Corp. to Mark E. Lucas (Incorporated by reference to Exhibit 10.1 to
Imations Form 8-K Current Report filed on February 17, 2009)10.2
    
    
    Directors Compensation Program Effective May 4, 2005 (As amended May 6, 2009)15.1
    
    
    An awareness letter from Imations independent registered public accounting firm regarding unaudited interim
financial statements31.1
    
    
    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
 
 SIGNATURE
  Imation Corp.Date: May 8, 2009
    
    /s/ Paul R. ZellerPaul R. ZellerVice President and Chief Financial Officer
(duly authorized officer and principal
financial officer)
 28




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber
    
    Description of Exhibit10.1
    
    
    Employment Offer Letter from Imation Corp. to Mark E. Lucas (Incorporated by reference to Exhibit 10.1 to
Imations Form 8-K Current Report filed on February 17, 2009)10.2
    
    
    Directors Compensation Program Effective May 4, 2005 (As amended May 6, 2009)15.1
    
    
    An awareness letter from Imations independent registered public accounting firm regarding unaudited interim
financial statements31.1
    
    
    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
 29