10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

R QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission File Number: 1-14310

IMATION CORP.

(Exact name of registrant as specified in its charter)

Delaware	41-1838504
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1 Imation Way Oakdale, Minnesota	55128
(Address of principal executive offices)	(Zip Code)

(651) 704-4000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. R Yes o No

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). R Yes o No

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer R Non-accelerated filer o(Do not check if a smaller reporting company) Smaller reporting companyo

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes R No

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 38,465,959 shares of Common Stock, par value $0.01 per share, were outstanding August 4, 2011.

IMATION CORP.

TABLE OF CONTENTS

	PAGE
PART I FINANCIAL INFORMATION	3
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010	3
Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010	4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010	5
Notes to Condensed Consolidated Financial Statements	6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	29
ITEM 4. CONTROLS AND PROCEDURES	29
PART II OTHER INFORMATION	29
ITEM 1. LEGAL PROCEEDINGS	29
ITEM 1A. RISK FACTORS	29
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	30
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	30
ITEM 4. (REMOVED AND RESERVED)	30
ITEM 5. OTHER INFORMATION	30
ITEM 6. EXHIBITS	30
SIGNATURE	32
EXHIBIT INDEX	33
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

IMATION CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except for per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Net revenue	$	323.0		$	354.4		$	639.5		$	720.2
Cost of goods sold	269.0			295.9			531.5			600.0
Gross profit	54.0			58.5			108.0			120.2
Operating expenses:
Selling, general and administrative	47.9			51.5			98.1			104.6
Research and development	5.0			3.9			9.7			8.3
Goodwill impairment	—			23.5			1.6			23.5
Restructuring and other	10.4			3.4			11.3			7.4
Total	63.3			82.3			120.7			143.8
Operating (loss) income	(9.3		)	(23.8		)	(12.7		)	(23.6		)
Other (income) and expense:
Interest income	(0.2		)	(0.2		)	(0.4		)	(0.4		)
Interest expense	1.0			1.0			1.9			2.1
Other, net	1.7			2.1			3.1			5.0
Total	2.5			2.9			4.6			6.7
Loss before income taxes	(11.8		)	(26.7		)	(17.3		)	(30.3		)
Income tax provision (benefit)	0.7			(11.0		)	2.4			(12.1		)
Loss from continuing operations	(12.5		)	(15.7		)	(19.7		)	(18.2		)
Discontinued operations:
Loss from discontinued operations, net of income taxes	—			—			—			(0.1		)
Net loss	$	(12.5	)	$	(15.7	)	$	(19.7	)	$	(18.3	)
(Loss) earnings per common share — basic:
Continuing operations	$	(0.33	)	$	(0.42	)	$	(0.52	)	$	(0.48	)
Discontinued operations	—			—			—			—
Net loss	(0.33		)	(0.42		)	(0.52		)	(0.49		)
(Loss) earnings per common share — diluted:
Continuing operations	$	(0.33	)	$	(0.42	)	$	(0.52	)	$	(0.48	)
Discontinued operations	—			—			—			—
Net loss	(0.33		)	(0.42		)	(0.52		)	(0.49		)
Weighted average shares outstanding
Basic	37.8			37.8			37.9			37.7
Diluted	37.8			37.8			37.9			37.7

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

3

IMATION CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

	June 30,		December 31,
	2011		2010
Assets
Current assets
Cash and cash equivalents	$	257.8	$	304.9
Accounts receivable, net	219.8		258.8
Inventories	221.8		203.3
Other current assets	61.7		74.2
Total current assets	761.1		841.2
Property, plant and equipment, net	61.9		66.9
Intangible assets, net	320.8		320.4
Goodwill	21.9		—
Other assets	24.0		22.5
Total assets	$	1,189.7	$	1,251.0
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	200.9	$	219.2
Other current liabilities	138.9		172.3
Total current liabilities	339.8		391.5
Other liabilities	79.2		77.8
Total liabilities	419.0		469.3
Shareholders’ equity	770.7		781.7
Total liabilities and shareholders’ equity	$	1,189.7	$	1,251.0

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

4

IMATION CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Six Months Ended
	June 30,
	2011			2010
Cash Flows from Operating Activities:
Net loss	$	(19.7	)	$	(18.3	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	5.7			9.1
Amortization	12.2			11.8
Deferred income taxes	0.8			(6.3		)
Goodwill impairment	1.6			23.5
Asset disposals	7.0			—
Inventory write-offs	1.5			—
Stock-based compensation	3.6			3.2
Pension settlement	1.0			—
Other	6.5			2.4
Changes in operating assets and liabilities:
Litigation settlement payment	(2.6		)	—
Accounts receivable	46.1			66.6
Inventories	(15.3		)	6.0
Other assets	(3.9		)	(0.3		)
Accounts payable	(22.6		)	26.7
Accrued payroll and other liabilities	(47.7		)	(24.4		)
Restricted cash	10.5			2.5
Net cash (used in) provided by operating activities	(15.3		)	102.5
Cash Flows from Investing Activities:
Capital expenditures	(4.5		)	(3.5		)
Acquisitions	(25.5		)	—
License agreement payment	—			(5.0		)
Other, net	—			0.1
Net cash used in investing activities	(30.0		)	(8.4		)
Cash Flows from Financing Activities:
Purchase of treasury stock	(6.8		)	—
Exercise of stock options	0.6			—
Net cash used in financing activities	(6.2		)	—
Effect of exchange rate changes on cash and cash equivalents	4.4			(6.2		)
Net change in cash and cash equivalents	(47.1		)	87.9
Cash and cash equivalents — beginning of period	304.9			163.4
Cash and cash equivalents — end of period	$	257.8		$	251.3

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

5

IMATION CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Basis of Presentation

The interim Condensed Consolidated Financial Statements of Imation Corp. (Imation, the Company, we, us or our) are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair statement of financial position, results of operations and cash flows for the periods presented. Except as otherwise disclosed herein, these adjustments consist of normal, recurring items. The results of operations for any interim period are not necessarily indicative of full year results. The Condensed Consolidated Financial Statements and Notes are presented in accordance with the requirements for Quarterly Reports on Form 10-Q and do not contain certain information included in our annual Consolidated Financial Statements and Notes.

The preparation of the interim Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses for the reporting periods. Despite our intention to establish accurate estimates and use reasonable assumptions, actual results may differ from our estimates.

The December 31, 2010 Condensed Consolidated Balance Sheet data was derived from the audited Consolidated Financial Statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. This Form 10-Q should be read in conjunction with our Consolidated Financial Statements and Notes included in our Annual Report on Form 10-K for the year ended December 31, 2010.

As a result of the wind down of our Global Data Media (GDM) business joint venture, those operations are presented in our historical Condensed Consolidated Financial Statements as discontinued operations for all periods presented.

Note 2 — Recently Issued or Adopted Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (FASB) issued amended guidance to enhance comparability between entities that report under generally accepted accounting principles in the United States (U.S. GAAP) and International Financial Reporting Standards (IFRS) and to provide a more consistent method of presenting non-owner transactions that affect an entity's equity. This guidance eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders' equity and requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. Regardless of whether one or two statements are presented, an entity is required to show reclassification adjustments on the face of the financial statements for items that are reclassified from other comprehensive income to net income. This guidance is effective for interim and annual reporting periods beginning January 1, 2012. The adoption of this guidance will change the presentation of our Consolidated Statements of Shareholders' Equity and Comprehensive Income.

In May 2011, the FASB issued amended disclosure requirements to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. This guidance changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This guidance is effective for reporting periods beginning January 1, 2012. We do not expect these disclosures to have a material impact on our Condensed Consolidated Financial Statements.

In January 2010, the FASB issued additional disclosure requirements for assets and liabilities held at fair value. Specifically, the new guidance requires a gross presentation of activities within the Level 3 roll forward and adds a new requirement to disclose transfers in and out of Level 1 and 2 measurements. This guidance is applicable to all entities currently required to provide disclosures about recurring and nonrecurring fair value measurements. The effective date for these disclosures for Imation was January 1, 2010, except for the gross presentation of the Level 3 roll forward information, which was required for interim reporting periods beginning January 1, 2011. The disclosures did not have a material impact on our Condensed Consolidated Financial Statements.

In December 2010, the FASB issued additional guidance for entities with reporting units that have carrying amounts equal to zero or are negative. These entities are required to assess whether it is more likely than not that the reporting units' goodwill is impaired. If it is determined that it is more likely than not that the goodwill of one or more of its reporting units is impaired, then Step 2 of the goodwill impairment test for those reporting unit(s) should be performed. Any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings in the period of adoption. Any goodwill impairments occurring after the initial adoption of the amendments should be included in earnings. The effective date for these disclosures for Imation was January 1, 2011. This guidance did not have a material impact on our Condensed Consolidated Financial Statements.

6

In December 2010, the FASB issued additional and amended annual disclosure requirements for supplementary pro forma information related to business combinations. The effective date for this guidance for Imation is prospective for business combinations on or after January 1, 2011. We do not expect these disclosures to have a material impact on our Condensed Consolidated Financial Statements.

A variety of proposed potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to our Condensed Consolidated Financial Statements.We intend to adopt all applicable newly issued accounting pronouncements when effective.

Note 3 — Earnings (Loss) per Common Share

Basic earnings per share is calculated using the weighted average number of shares outstanding for the period. Diluted earnings per share is computed on the basis of the weighted average basic shares outstanding plus the dilutive effect of our stock-based compensation plans using the “treasury stock” method. Unvested restricted stock and treasury shares are excluded from the calculation of weighted average number of common shares outstanding because they do not participate in dividends. Once restricted stock vests, it is included in our common shares outstanding.

The following table sets forth the computation of the weighted average basic and diluted income (loss) per share:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2011			2010			2011			2010
Numerator:
Loss from continuing operations	$	(12.5	)	$	(15.7	)	(19.7		)	(18.2		)
(Loss) income from discontinued operations	—			—			—			(0.1		)
Net loss	$	(12.5	)	$	(15.7	)	$	(19.7	)	$	(18.3	)
Denominator:
Weighted average number of common shares outstanding during the period	37.8			37.8			37.9			37.7
Dilutive effect of stock-based compensation plans	—			—			—			—
Weighted average number of diluted shares outstanding during the period	37.8			37.8			37.9			37.7
Basic (loss) earnings per common share:
Continuing operations	$	(0.33	)	$	(0.42	)	$	(0.52	)	$	(0.48	)
Discontinued operations	—			—			—			—
Net loss	(0.33		)	(0.42		)	(0.52		)	(0.49		)
Diluted (loss) earnings per common share:
Continuing operations	$	(0.33	)	$	(0.42	)	$	(0.52	)	$	(0.48	)
Discontinued operations	—			—			—			—
Net loss	(0.33		)	(0.42		)	(0.52		)	(0.49		)
Anti-dilutive options excluded from calculation	5.3			4.4			4.4			4.9

Earnings per share amounts for continuing operations, discontinued operations and net loss, as presented on the Condensed Consolidated Statements of Operations, are calculated individually and may not sum due to rounding differences.

Note 4 — Acquisitions

MXI Security

On June 4, 2011, we acquired substantially all of the assets of MXI Security, a leader in high-security and privacy technologies, from Memory Experts International Inc. MXI Security sells encrypted and biometric USB drives (MXI Stealth Key), encrypted and biometric hard disk drives (MXI Stealth HD), secure portable desktop solutions (Stealth Zone), and software solutions. MXI Security products contain various security features such as password authentication, encryption, and remote manageability. The preliminary purchase price consisted of a cash payment of $24.5 million and the estimated fair value of future contingent consideration of $9.2 million, totaling $33.7 million.

The preliminary purchase price allocation resulted in goodwill of $21.9 million, made up of expected strategic synergies

and intangible assets that do not qualify for separate recognition. MXI Security is included in our existing Americas operating segment and functions as a business with discrete financial information available. Therefore, MXI Security is a separate reporting unit for the purposes of goodwill impairment testing. Goodwill will be tested for impairment annually or when there are indications that impairment might exist.

The following table illustrates our preliminary allocation of the purchase price to the assets acquired and liabilities assumed:

(In millions)	Amount
Accounts receivable and other assets	$	0.8
Inventories	1.1
Intangible assets	10.6
Goodwill	21.9
Accounts payable and other liabilities	(0.7		)
	$	33.7

Our preliminary allocation of the purchase price to the assets acquired and liabilities assumed resulted in the recognition of the following intangible assets:

			Weighted
(In millions)	Amount		Average Life
Trademark	$	0.7	10 years
Supply agreement	1.4		3 years
Customer relationships	1.0		8 years
Proprietary technology	7.5		6 years
	$	10.6

The effects of the acquisition did not materially impact our 2011 results of operations. Therefore, pro forma disclosures are not required and, accordingly, are not included.

BeCompliant Corporation (doing business as Encryptx)

On February 28, 2011, we acquired substantially all of the assets of BeCompliant Corporation (doing business as Encryptx), a technology leader in encryption and security solutions for removable storage devices and removable storage media. The purchase price was $2.3 million, consisting of a cash payment of $1.0 million and the estimated fair value of future contingent consideration of $1.3 million.

The purchase price allocation resulted in goodwill of $1.6 million, made up of expected strategic synergies and intangible assets that do not qualify for separate recognition. The goodwill was allocated to our existing Americas-Commercial reporting unit. Goodwill is considered impaired when its carrying amount exceeds its implied fair value. As of March 31, 2011, the carrying amount of all of our reporting units significantly exceeded their fair value and we performed an impairment test. Based on the goodwill test performed as of March 31, 2011, we determined that the carrying amount of the goodwill in the Americas-Commercial reporting unit, including the assets of Encryptx, exceeded the implied fair value and, therefore, the goodwill was fully impaired. As a result, a $1.6 million goodwill impairment charge was recorded during the three months ended March 31, 2011 in the Condensed Consolidated Statements of Operations.

The effects of the acquisition did not materially impact our 2011 results of operations. Therefore, pro forma disclosures are not required and, accordingly, are not included.

Note 5 — Supplemental Balance Sheet Information

	June 30,			December 31,
(In millions)	2011			2010
Accounts Receivable
Accounts receivable	$	238.1		$	279.4
Less reserves and allowances*	(18.3		)	(20.6		)
Accounts receivable, net	$	219.8		$	258.8
Inventories
Finished goods	$	194.0		$	175.0
Work in process	18.2			10.6
Raw materials and supplies	9.6			17.7
Total inventories	$	221.8		$	203.3
Other Current Assets
Deferred income taxes	$	8.1		$	9.1
Restricted cash	8.5			17.9
Assets held for sale (Note 7)	3.2			7.2
Taxes receivable	5.2			2.0
Other	36.7			38.0
Total other current assets	$	61.7		$	74.2
Property, Plant and Equipment (Note 7)
Property, plant and equipment	$	250.1		$	349.3
Less accumulated depreciation	(188.2		)	(282.4		)
Property, plant and equipment, net	$	61.9		$	66.9
Other Assets
Deferred income taxes	$	13.1		$	12.2
Other	10.9			10.3
Total other assets	$	24.0		$	22.5
Other Current Liabilities
Rebates	$	43.5		$	53.4
Levies	21.9			23.6
Accrued payroll	13.2			15.6
Litigation settlement — current	8.3			10.6
Employee separation costs	4.6			10.5
Other	47.4			58.6
Total other current liabilities	$	138.9		$	172.3
Other Liabilities
Pension	$	17.4		$	27.0
Litigation settlement — long-term	15.5			15.1
Deferred income taxes	3.7			3.4
Other	42.6			32.3
Total other liabilities	$	79.2		$	77.8

* Accounts receivable reserves and allowances include estimated amounts for customer returns, discounted terms and the inability of certain customers to make the required payment.

Note 6 — Intangible Assets and Goodwill

Intangible Assets

9

The components of our amortizable intangible assets were as follows:

(In millions)	Trade Names			Software			Customer Relationships			Other			Total
June 30, 2011
Gross carrying amount	$	342.7		$	55.1		$	60.6		$	8.3		$	466.7
Accumulated amortization	(50.7		)	(50.2		)	(41.2		)	(3.8		)	(145.9		)
Intangible assets, net	$	292.0		$	4.9		$	19.4		$	4.5		$	320.8
December 31, 2010
Gross carrying amount	$	332.4		$	54.2		$	58.8		$	8.3		$	453.7
Accumulated amortization	(44.9		)	(49.1		)	(36.2		)	(3.1		)	(133.3		)
Intangible assets, net	$	287.5		$	5.1		$	22.6		$	5.2		$	320.4

Amortization expense for intangible assets consisted of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2011		2010		2011		2010
Amortization expense	$	6.2	$	6.0	$	12.2	$	11.8

Based on the intangible assets in service as of June 30, 2011, estimated amortization expense for the remainder of 2011 and for each of the next four years ending December 31 is as follows:

(In millions)	2011		2012		2013		2014		2015
Amortization expense	$	12.0	$	25.4	$	20.1	$	14.8	$	12.8

Goodwill

See Note 4 herein for discussion of acquisitions and related goodwill acquired during the six months ended June 30, 2011.

Goodwill consists of the following:

(In millions)	June 30,			December 31,
	2011			2010
Goodwill	$	175.8		$	152.3
Accumulated impairment losses	(153.9		)	(152.3		)
Goodwill, net of accumulated impairment losses	$	21.9		$	—

Note 7 — Restructuring and Other Expense

The components of our restructuring and other expense included in the Condensed Consolidated Statements of Operations were as follows:

10

	Three Months Ended		Six Months Ended
(In millions)	June 30, 2011		June 30, 2011
Restructuring
Severance and related	$	0.7	$	1.3
Lease termination costs	0.2		0.4
Other	$	0.3	$	0.4
Total restructuring	$	1.2	$	2.1
Other
Pension settlement	1.0		1.0
Asset disposals	7.0		7.0
Acquisition and integration related costs	1.2		1.2
Total	$	10.4	$	11.3

2011 Manufacturing Redesign Restructuring Program

On January 13, 2011, the Board of Directors approved the 2011 manufacturing redesign restructuring program of up to $55 million to rationalize certain product lines and discontinue tape coating operations at our Weatherford, Oklahoma facility by April 2011 and subsequently close the facility. We signed a strategic agreement with TDK Corporation to jointly develop and manufacture magnetic tape technologies. Under the agreement, we are collaborating on the research and development of future tape formats in both companies' research centers in the United States and Japan, while consolidating tape coating operations to the TDK Yamanashi manufacturing facility. This program includes a total of approximately $50 million in restructuring and other charges, consisting of severance and related costs of approximately $3 million, asset impairments of approximately $31 million primarily related to the Weatherford facility, inventory write-offs of approximately $14 million and other charges of approximately $2 million.

During the three months ended June 30, 2011 no additional costs were incurred related to this program. During the six months ended June 30, 2011 we recorded inventory write-offs of $1.0 million related to this program, which are included in cost of goods sold in our Condensed Consolidated Statements of Operations. Since the inception of this program, we have recorded a total of $15.2 million of inventory write-offs, $31.2 million of asset impairment charges and $3.2 million of severance and related expenses.

As of June 30, 2011, the Weatherford facility met the held for sale criteria outlined in the accounting guidance for the sale of a long-lived asset. Accordingly, the book value of the building and property, $3.0 million, was transferred into other current assets on the Condensed Consolidated Balance Sheet and is no longer being depreciated.

Changes in the 2011 manufacturing redesign restructuring program accruals were as follows:

(In millions)	Severance and Related			Lease Termination Costs		Other			Total
Accrued balance at December 31, 2010	$	3.2		$	—	$	—		$	3.2
Charges (1)	—			—		1.0			1.0
Usage (1)	(0.4		)	—		(1.0		)	(1.4		)
Currency impacts	—			—		—			—
Accrued balance at March 31, 2011	$	2.8		$	—	$	—		$	2.8
Charges	—			—		—			—
Usage	(2.3		)	—		—			(2.3		)
Currency Impacts	—			—		—			—
Accrued balance at June 30, 2011	$	0.5		$	—	$	—		$	0.5

(1) Other includes inventory write-offs of $1.0 million.

We expect the majority of the severance and related portion of this liability to be paid out during 2011.

2011 Corporate Strategy Restructuring Program

On January 31, 2011, the Board of Directors approved the 2011 corporate strategy restructuring program to rationalize

11

certain product lines, increase efficiency and gain greater focus in support of our go-forward strategy. Major components of the program include charges associated with certain benefit plans, improvements to our global sourcing and distribution network, costs associated with further rationalization of our product lines and evolution of our skill sets to align with our announced strategy. This program includes a total of approximately $35 million in restructuring and other charges, consisting of severance and related expenses of approximately $14 million, charges associated with certain benefit plans of approximately $11 million, lease termination expenses of approximately $5 million and other charges of approximately $5 million.

 During the three months ended June 30, 2011 we recorded a restructuring charge of $1.2 million as part of this program, which included $0.7 million for severance and related expenses, $0.2 million for lease termination costs and $0.3 million of other charges. These costs were included in restructuring and other on our Condensed Consolidated Statements of Operations. In addition, we also recorded inventory write-offs of $0.3 million related to the planned rationalization of certain product lines as part of this program, which are included in cost of goods sold in our Condensed Consolidated Statements of Operations.

During the six months ended June 30, 2011 we recorded restructuring charges of $2.1 million as part of this program, which included $1.3 million for severance and related expenses, $0.4 million for lease termination costs and $0.4 million of other charges. These costs were included in restructuring and other on our Condensed Consolidated Statements of Operations. In addition, we also recorded inventory write-offs of $0.5 million related to the planned rationalization of certain product lines as part of this program, which are included in cost of goods sold in our Condensed Consolidated Statements of Operations. Since the inception of this program, we have recorded a total of $4.7 million of severance and related expenses, $0.5 million of inventory write-offs, $0.4 million of other charges, $0.4 million of lease termination costs and $0.3 million related to a pension curtailment charge.

Changes in the 2011 corporate strategy restructuring program accruals were as follows:

(In millions)	Severance and Related			Lease Termination Costs			Other			Total
Accrued balance at December 31, 2010	$	3.4		$	—		$	—		$	3.4
Charges (1)	0.6			0.2			0.3			1.1
Usage (1)	(1.0		)	(0.2		)	(0.4		)	(1.6		)
Currency impacts	0.2			—			0.2			0.4
Accrued balance at March 31, 2011	$	3.2		$	—		$	0.1		$	3.3
Charges (1)	0.7			0.2			0.6			1.5
Usage (1)	(1.4		)	(0.2		)	(0.6		)	(2.2		)
Currency impacts	—			—			—			—
Accrued balance at June 30, 2011	$	2.5		$	—		$	0.1		$	2.6

(1) Other includes inventory write-offs of $0.2 million and $0.3 million for the three months ended March 31, 2011 and June 30, 2011, respectively.

We expect the majority of the severance and related portion of this liability to be paid out during 2011.

Other

Our Camarillo, California manufacturing facility ceased operations on December 31, 2008 and the facility, comprised of a building and property, was classified as held for sale. In an effort to increase the salability of the property, during the three months ended June 30, 2011, we demolished the building resulting in a $7.0 million loss on disposal during the period. The land related to the facility continues to meet the criteria for held for sale accounting and, therefore, remains classified in other current assets on the Condensed Consolidated Balance Sheet as of June 30, 2011.

We recorded $1.2 million of acquisition and integration related costs as a result of our acquisition activities during the three months ended June 30, 2011 within restructuring and other expense in the Condensed Consolidated Statements of Operations.

We recorded a pension settlement loss of $1.0 million during the three months ended June 30, 2011 within restructuring and other expense in the Condensed Consolidated Statements of Operations as a result of the downsizing associated with our domestic restructuring activities. See Note 9 herein for further information regarding the pension settlement.

Note 8 — Stock-Based Compensation

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Stock compensation expense consisted of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2011		2010		2011		2010
Stock compensation expense	$	1.8	$	1.5	$	3.6	$	3.2

The 2011 Stock Incentive Plan was approved and adopted by our shareholders on May 4, 2011 and became effective immediately. The 2011 Stock Incentive Plan permits the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, performance awards, stock awards and other stock-based awards. The aggregate number of shares of our common stock that may be issued under all stock-based awards made under the 2011 Stock Incentive Plan is 4.5 million and the maximum number of shares that may be awarded pursuant to grants of awards other than options and stock appreciation rights is 1.1 million. The number of shares available for awards, as well as the terms of outstanding awards, is subject to adjustments as provided in the 2011 Stock Incentive Plan for stock splits, stock dividends, recapitalization and other similar events. Awards may be granted under the 2011 Stock Incentive Plan until the earlier to occur of May 3, 2021 or the date on which all shares available for awards under the 2011 Stock Incentive Plan have been purchased or acquired; provided, however, that incentive stock options may not be granted after February 10, 2021. As a result of the approval and adoption of the 2011 Stock Incentive Plan, no further shares are available for grant under the 2008 Stock Incentive Plan.

As of June 30, 2011, we had stock-based compensation awards outstanding under five plans (collectively, the Stock Plans) consisting of stock options, restricted stock and restricted stock units. As of June 30, 2011, there were 3,943,462 shares available for grant under our 2011 Stock Incentive Plan. No further shares were available for grant under any other Stock Plan.

Stock Options

The following table summarizes our stock option activity:

	Stock Options		Weighted Average Exercise Price
Outstanding December 31, 2010	4,916,088		$	24.10
Granted	1,291,580		9.64
Exercised	(45,429	)	10.13
Cancelled	(378,680	)	36.22
Forfeited	(82,111	)	14.76
Outstanding June 30, 2011	5,701,448		$	20.26
Exercisable as of June 30, 2011	3,395,297		$	26.69

The outstanding options are non-qualified and generally have a term of ten years. For employees, the options granted prior to May 2011 generally become exercisable and vest 25 percent per year beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. Grants during and after May 2011 become exercisable and vest 33 percent per year beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. For directors, the options generally become exercisable in full on the first anniversary of the grant date.

The weighted average grant date fair value of options that were granted for the six months ended June 30, 2011 was $4.25.

The following table summarizes our weighted average assumptions used in the valuation of options:

	2011
Volatility	44.0	%
Risk-free interest rate	2.2	%
Expected life (months)	70
Dividend yield	—	%

As of June 30, 2011, there was $9.2 million of total unrecognized compensation expense related to non-vested stock options granted under our Stock Plans. That expense is expected to be recognized over a weighted average period of 2.5 years.

Restricted Stock

The following table summarizes our restricted stock activity:

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	Restricted Stock		Weighted Average Grant Date Fair Value Per Share
Nonvested as of December 31, 2010	739,196		$	11.34
Granted	345,819		9.58
Vested	(247,432	)	12.51
Forfeited	(45,978	)	12.12
Nonvested as of June 30, 2011	791,605		$	10.16

The cost of the awards is determined using the fair value of the Company’s common stock on the date of the grant and compensation is recognized on a straight-line basis over the requisite vesting period. For employees, the restricted shares granted prior to May 2011 generally vest 25 percent per year beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. Grants during and after May 2011 become exercisable and vest 33 percent per year beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. For directors, the restricted shares generally vest in full on the first anniversary of the grant date.

As of June 30, 2011, there was $7.3 million of total unrecognized compensation expense related to non-vested restricted stock granted under our Stock Plans. That expense is expected to be recognized over a weighted average period of 2.5 years.

Note 9 — Retirement Plans

Pension Plans

Effective January 1, 2010, the United States defined benefit pension plan was amended to exclude new hires and rehires from participating in the plan. In addition, we eliminated benefit accruals under the U.S. defined benefit pension plan as of January 1, 2011, thus “freezing” the plan. Under the plan freeze, no pay credits will be made to a participant's account balance after December 31, 2010. However, interest credits will continue in accordance with the annual update process.

In connection with actions taken under our announced restructuring programs, the number of employees accumulating benefits under our pension plan in the United States continues to decline. Participants in our U.S. defined benefit pension plan have the option of receiving cash lump sum payments when exiting the plan, which a number of participants exiting the plan have elected to receive. Lump sum payments in 2011 have exceeded our 2010 service and interest costs. As a result, a partial settlement event occurred during the three months ended June 30, 2011 and we recognized a loss of $1.0 million. The settlement loss is included in restructuring and other expense in our Condensed Consolidated Statements of Operations. Additionally, in connection with the settlement and as required by pension accounting, we remeasured the funded status of our U.S. defined benefit pension plan as of June 30, 2011.

During the six months ended June 30, 2011, we contributed $10.7 million to our worldwide pension plans. We presently anticipate contributing approximately $1 million to $3 million to fund our worldwide pension plans during the remaining six months of 2011.

Components of net periodic pension cost included the following:

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	United States						International						United States						International
	Three Months Ended June 30,												Six Months Ended June 30,
(In millions)	2011			2010			2011			2010			2011			2010			2011			2010
Service cost	$	—		$	0.4		$	0.1		$	0.2		$	—		$	0.8		$	0.2		$	0.4
Interest cost	1.1			1.2			0.7			0.8			2.2			2.4			1.4			1.4
Expected return on plan assets	(1.6		)	(1.4		)	(0.9		)	(0.8		)	(3.1		)	(2.9		)	(1.7		)	(1.5		)
Amortization of net actuarial (gain) loss	0.3			—			0.1			—			0.4			—			0.2			—
Amortization of prior service cost (credit)	—			0.1			(0.1		)	0.1			—			0.2			(0.2		)	0.1
Net periodic pension cost	$	(0.2	)	$	0.3		$	(0.1	)	$	0.3		$	(0.5	)	$	0.5		$	(0.1	)	$	0.4
Settlement	1.0			—			—			—			1.0			—			—			—
Total pension costs	$	0.8		$	0.3		$	(0.1	)	$	0.3		$	0.5		$	0.5		$	(0.1	)	$	0.4

Note 10 — Income Taxes

We are subject to income tax in numerous jurisdictions and the use of estimates is required in determining our provision for income taxes. For the three and six month periods ended June 30, 2011, we recorded an income tax provision of $0.7 million and $2.4 million, respectively. The income tax provision (benefit) is based on the estimated annual effective tax rate for the year applied to “ordinary” income (loss). Ordinary income (loss) is pre-tax income (loss) excluding unusual or infrequently occurring discrete items. The overall estimated annual effective tax rate calculation excludes jurisdictions reporting losses for which no tax benefit is expected to be recognized during the year. A separate estimated annual effective tax rate was calculated for the jurisdictions reporting losses for which no tax benefit can be recognized. The effective income tax rate for the three and six months ended June 30, 2011 was (5.9) percent and (13.9) percent, respectively, compared with 41.2 percent and 39.9 percent in the same periods last year. The effective rate changes were primarily due to the full valuation allowance on U.S. deferred tax assets and the mix of taxable income/loss by country.

The effective income tax rate for the three and six month periods ended June 30, 2011 differs from the U.S. federal statutory rate of 35 percent primarily due to the full valuation allowance on U.S. deferred tax assets and the effects of foreign tax rate differential.

We conduct business globally. As a result, we file income tax returns and are subject to examination by taxing authorities in various jurisdictions throughout the world. Our U.S. federal income tax returns for 2006 through 2009 remain subject to examination by the Internal Revenue Service (IRS). The IRS completed its field work for the 2006 through 2008 examination in the second quarter of 2010 and has proposed adjustments. The matter is currently in IRS appeal. Due to a valuation allowance against our U.S. deferred tax assets, if issues under appeal were lost, we expect the impact to our Consolidated Statements of Operations would only be interest in excess of the amounts already accrued. The years 2004 through 2009 remain subject to examination by foreign tax jurisdictions as well as state and city tax jurisdictions. In the event that we have determined not to file tax returns with a particular state or city, all years remain subject to examination by that tax jurisdiction.

We accrue for the effects of uncertain tax positions and the related potential penalties and interest. There were no material adjustments to our recorded unrecognized tax benefits during the six months ended June 30, 2011. Our liability related to uncertain tax positions was $17.5 million as of each June 30, 2011 and December 31, 2010. It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of our unrecognized tax positions will increase or decrease during the next twelve months.

Taxes collected from customers that were included in revenue for the three months ended June 30, 2011 and 2010 were $5.2 million and $6.1 million, respectively. Taxes collected from customers and remitted to governmental authorities that were included in revenue for the six months ended June 30, 2011 and 2010 were $10.2 million and $15.8 million, respectively.

Note 11 — Fair Value Measurements

At June 30, 2011 and 2010, our financial instruments included cash and cash equivalents, accounts receivable, accounts payable and derivative contracts. The fair values of cash and cash equivalents, accounts receivable and accounts payable approximated carrying values due to the short-term nature of these instruments. In addition, certain derivative instruments are recorded at fair value as discussed below.

Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets for identical assets); Level 2 (significant observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

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The assets in our postretirement benefit plans are measured at fair value on a recurring basis (at least annually). See Note 9 herein for additional discussion concerning pension and postretirement benefit plans.

We maintain a foreign currency exposure management policy that allows the use of derivative instruments, principally foreign currency forwards, option contracts and option combination strategies to manage risks associated with foreign exchange rate volatility. Generally, these contracts are entered into to fix the U.S. dollar amount of the eventual cash flows. The derivative instruments range in duration at inception up to fifteen months. We do not hold or issue derivative financial instruments for speculative or trading purposes and we are not a party to leveraged derivatives.

We are exposed to the risk of nonperformance by our counter-parties, but we do not anticipate nonperformance by any of these counter-parties. We actively monitor our exposure to credit risk through the use of credit approvals and credit limits and by using major international banks and financial institutions as counter-parties.

As of June 30, 2011, we held derivative instruments that are required to be measured at fair value on a recurring basis. Our derivative instruments consist of currency forwards, option contracts and option combination strategies. The fair value of our derivative instruments is determined based on inputs that are observable in the public market, but are other than publicly quoted prices (Level 2).

Hedge gains of $0.2 million and $0.3 million were reclassified into the Condensed Consolidated Statements of Operations during the three months ended June 30, 2011 and 2010, respectively. Hedge gains of $0.2 million and $0.4 million were reclassified into the Condensed Consolidated Statements of Operations during the six months ended June 30, 2011 and 2010, respectively. The amount of net deferred gains on foreign currency cash flow hedges included in accumulated other comprehensive income (loss) in shareholders’ equity as of June 30, 2011 was $1.0 million, pre-tax, which, depending on market factors, is expected to be reversed in the Condensed Consolidated Balance Sheet or be reclassified into operations during the next three to six months.

Our financial assets and liabilities that are measured at fair value on a recurring basis were as follows:

	June 30, 2011							December 31, 2010
(In millions)	Level 1		Level 2			Level 3		Level 1		Level 2			Level 3
Derivative assets
Foreign currency option contracts	$	—	$	0.4		$	—	$	—	$	3.5		$	—
Foreign currency forward contracts	—		—			—		—		—			—
Derivative liabilities
Foreign currency option contracts	—		(1.2		)	—		—		(2.3		)	—
Foreign currency forward contracts	—		—			—		—		—			—
Total	$	—	$	(0.8	)	$	—	$	—	$	1.2		$	—

Cash Flow Hedges

We attempt to mitigate the risk that forecasted cash flows denominated in foreign currencies may be adversely affected by changes in currency exchange rates through the use of option, forward and combination option contracts. The degree of our hedging can fluctuate based on management judgment and forecasted projections. We formally document all relationships between hedging instruments and hedged items, as well as our risk management objective and strategy for undertaking the hedge items. This process includes linking all derivatives to forecasted transactions.

We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in the cash flows of hedged items. Gains and losses related to cash flow hedges are deferred in accumulated other comprehensive income (loss) with a corresponding asset or liability. When the hedged transaction occurs, the gains and losses in accumulated other comprehensive income (loss) are reclassified into the Condensed Consolidated Statements of Operations in the same line as the item being hedged. If at any time it is determined that a derivative is not highly effective as a hedge, we discontinue hedge accounting prospectively, with deferred gains and losses being recognized in current period operations.

Other Hedges

We enter into foreign currency forward contracts, generally with durations of less than two months, to manage the foreign currency exposure related to our monetary assets and liabilities denominated in foreign currencies. We record the estimated fair value of these forwards within other current assets or other current liabilities in the Condensed Consolidated Balance Sheets, and all changes in their fair value are immediately recognized in the Condensed Consolidated Statements of Operations.

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The notional amounts and fair values of our derivative instruments in the Condensed Consolidated Financial Statements were as follows:

	June 30, 2011							December 31, 2010
			Fair Value							Fair Value
(In millions)	Notional Amount		Other Current Assets		Other Current Liabilities			Notional Amount		Other Current Assets		Other Current Liabilities
Cash flow hedges designated as hedging instruments	$	123.0	$	0.4	$	(1.2	)	$	246.0	$	3.5	$	(2.3	)
Other hedges not receiving hedge accounting	80.0		—		(0.1		)	47.1		—		—
Total	$	203.0	$	0.4	$	(1.3	)	$	293.1	$	3.5	$	(2.3	)

On June 30, 2011 we entered into certain hedges not receiving hedge accounting treatment. In accordance with trade date accounting, these hedges and related exposures are recorded as of June 30, 2011, but do not have a value until the subsequent day.

The derivative gains and losses in the Condensed Consolidated Statements of Operations were as follows:

(In millions)	Pretax Gain (Loss) Recognized in Other Comprehensive Income on Effective Portion of Derivative			Pretax Gain (Loss) on Effective Portion of Derivative Reclassification from Accumulated Other Comprehensive Income to Cost of Goods Sold, net		Pretax Gain (Loss) Recognized in the Condensed Statements of Operations in Other Expenses, net
For the three months ended June 30, 2011
Cash flow hedges designated as hedging instruments	$	(1.2	)	$	0.2	$	—
Other hedges not receiving hedge accounting	—			—		(0.2		)
Total	$	(1.2	)	$	0.2	$	(0.2	)
For the three months ended June 30, 2010
Cash flow hedges designated as hedging instruments	$	0.1		$	0.3	$	—
Other hedges not receiving hedge accounting	—			—		(0.3		)
Total	$	0.1		$	0.3	$	(0.3	)

(In millions)	Pretax Gain (Loss) Recognized in Other Comprehensive Income on Effective Portion of Derivative			Pretax Gain (Loss) on Effective Portion of Derivative Reclassification from Accumulated Other Comprehensive Income to Cost of Goods Sold, net		Pretax Gain (Loss) Recognized in the Condensed Statements of Operations in Other Expenses, net
For the six months ended June 30, 2011
Cash flow hedges designated as hedging instruments	$	(2.0	)	$	0.2	$	—
Other hedges not receiving hedge accounting	—			—		(0.1		)
Total	$	(2.0	)	$	0.2	$	(0.1	)
For the six months ended June 30, 2010
Cash flow hedges designated as hedging instruments	$	0.8		$	0.4	$	—
Other hedges not receiving hedge accounting	—			—		(1.2		)
Total	$	0.8		$	0.4	$	(1.2	)

Note 12 — Shareholders' Equity

Treasury Stock

On January 28, 2008, our Board of Directors authorized the repurchase of a total of 3.0 million shares. Since the inception of this authorization we have repurchased 1.4 million shares of common stock and as of June 30, 2011 we have remaining authorization to repurchase up to 1.6 million shares. The treasury stock held as of June 30, 2011 was acquired at an average price of $24.66 per share.

Following is a summary of treasury share activity:

	Treasury Shares
Balance as of December 31, 2010	4,212,285
Purchases	686,159
Exercise of stock options	(45,429	)
Restricted stock grants and other	(257,455	)
401(k) matching contribution	(121,079	)
Balance as of June 30, 2011	4,474,481

Comprehensive Income (Loss)

Accumulated other comprehensive loss consisted of the following:

	June 30,			December 31,
(In millions)	2011			2010
Cumulative currency translation adjustment	$	(36.4	)	$	(47.4	)
Pension adjustments, net of income tax	(13.1		)	(14.2		)
Cash flow hedging and other, net of income tax	(0.8		)	0.9
Total accumulated other comprehensive loss	$	(50.3	)	$	(60.7	)

Comprehensive loss consisted of the following:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2011			2010			2011			2010
Net loss	$	(12.5	)	$	(15.7	)	$	(19.7	)	$	(18.3	)
Cumulative currency translation adjustment	5.4			(10.4		)	11.0			(15.2		)
Pension adjustments, net of income taxes	1.0			0.1			1.1			0.2
Cash flow hedging and other, net of income tax	(1.0		)	0.3			(1.7		)	0.5
Total comprehensive loss	$	(7.1	)	$	(25.7	)	$	(9.3	)	$	(32.8	)

Note 13 — Segment Information

 Our business is organized, managed and internally and externally reported as segments differentiated by the regional markets we serve: Americas, Europe, North Asia and South Asia. Each of these geographic segments has responsibility for selling all of our product lines.

We evaluate segment performance based on revenue and operating income. Revenue for each segment is generally based on customer location where the product is shipped. The operating income reported in our segments excludes corporate and other unallocated amounts. Although such amounts are excluded from the business segment results, they are included in reported consolidated earnings. Corporate and unallocated amounts include litigation settlement expense, goodwill impairment expense, research and development expense, corporate expense, stock-based compensation expense, inventory write-offs and restructuring and other expenses which are not allocated to the segments.

17

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2011		2010		2011		2010
Net Revenue
Americas	$	142.8	$	181.2	$	285.9	$	342.9
Europe	64.1		64.5		126.4		151.2
North Asia	80.1		73.0		154.3		154.3
South Asia	36.0		35.7		72.9		71.8
Total	$	323.0	$	354.4	$	639.5	$	720.2

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2011			2010			2011			2010
Operating Income (Loss)
Americas	$	1.1		$	9.4		$	3.1		$	18.5
Europe	2.3			(1.5		)	3.2			0.3
North Asia	6.1			2.4			9.4			5.5
South Asia	0.5			1.0			0.9			2.0
Corporate and unallocated	(19.3		)	(35.1		)	(29.3		)	(49.9		)
Total	$	(9.3	)	$	(23.8	)	$	(12.7	)	$	(23.6	)

Corporate and unallocated amounts above include goodwill impairment, inventory write-offs related to our restructuring programs, pension settlement, facility disposal and restructuring and other expense of $10.7 million and $26.9 million for the three months ended June 30, 2011 and 2010, respectively. Corporate and unallocated amounts above include goodwill impairment, inventory write-offs related to our restructuring programs, pension settlement, facility disposal and restructuring and other expense of $14.4 million and $30.9 million for the six months ended June 30, 2011 and 2010, respectively.

We have three major product categories: traditional storage, secure and scalable storage, and electronics and accessories. During the three months ended June 30, 2011, we changed the name of the emerging storage product category to secure and scalable storage to better reflect our direction and future product offerings. Traditional storage products include optical products, magnetic products and other traditional storage media products. Optical products primarily include DVDs, CDs and Blu-ray disc recordable media. Magnetic products primarily include data storage tape media. Other traditional storage products primarily include optical drives and audio and video tape media. Secure and scalable products include flash memory and hard disk drive products, including secure USB flash drives, external hard disk drives, removable hard disk drives and solid state drives. Electronics and accessories primarily include CD players, alarm clocks, portable boom boxes, MP3 players, Apple iPad®, iPod® and iPhone® accessories, headphones, speakers and gaming accessories.

Net revenue by product category was as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2011		2010		2011		2010
Net Revenue
Traditional storage
Optical products	$	129.3	$	153.2	$	257.0	$	310.6
Magnetic products	85.3		84.2		167.8		174.2
Other traditional storage	13.0		16.7		25.6		32.8
Total traditional storage	227.6		254.1		450.4		517.6
Secure and scalable storage	55.4		48.9		108.1		106.4
Electronics and accessories	40.0		51.4		81.0		96.2
Total	$	323.0	$	354.4	$	639.5	$	720.2

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Note 14 — Litigation, Commitments and Contingencies

We are the subject of various pending or threatened legal actions in the ordinary course of our business. All such matters are subject to many uncertainties and outcomes that are not predictable with assurance. Additionally, our electronics and accessories business is subject to allegations of patent infringement by our competitors as well as by non-practicing entities (NPEs), sometimes referred to as “patent trolls,” who may seek monetary settlements from us, our competitors, suppliers and resellers. Consequently, as of June 30, 2011, we are unable to ascertain the ultimate aggregate amount of any monetary liability or financial impact that we may incur with respect to these matters. While these matters could materially affect operating results depending upon the final resolution in future periods, it is our opinion that after final disposition, any monetary liability beyond that provided in the Condensed Consolidated Balance Sheet as of June 30, 2011 would not be material to our Condensed Consolidated Financial Statements.

On June 19, 2009, Advanced Research Corp. (ARC) sued Imation in Ramsey County District court for breach of contract relating to a supply agreement under which we purchase our requirements for magnetic heads to write servo patterns on magnetic tape prior to sale of the finished cartridges, requesting the court to order that Imation pay damages and return the purchased heads to ARC. ARC is alleging that we misrepresented the volumes of heads that we would require, and that ARC invested in a new facility in reliance on our forecasts. ARC has claimed damages in excess of $27.2 million and we have filed counterclaims against ARC for its failure to comply with the supply agreement and other agreements, claiming damages in excess of $8.5 million. In March 2010, both Imation and ARC filed motions for partial summary judgment, which motions were denied by the court on July 6, 2010. On July 27, 2010, the court granted ARC's motion to amend its complaint to add a claim for trade secret misappropriation. On March 29, 2011, Imation moved for summary judgment on the claim of trade secret misappropriation. On July 21, 2011, the court granted Imation's summary judgment motion to dismiss ARC's trade secret misappropriation claim. A trial date has been set for October 2011. Imation believes that the ultimate resolution of this legal proceeding will not have a material adverse effect on the Company's financial condition, results of operations or cash flows.

In some countries, primarily Europe and Canada, the sale of recordable optical media is subject to a private copying levy, which is an extra charge on purchases of these products. Imation collects the levies upon sale, and submits payment of the levies to copyright collective non-government agencies for distribution to content providers as “fair compensation” for the harm caused to them due to private copies made by natural persons of protected works. For several years the amount of the levy in Europe has been in question and the subject of various litigation and law making activities. We have continued to accrue the levies but are awaiting resolution before submitting some of the required payments. Depending on the final outcome of the various litigation and law making activities, if some amount less than what we have accrued does not need to be paid, this amount will be recorded as a reduction to our cost of goods sold in the period that the resolution is determined. During the six months ended June 30, 2011, we reversed $5.5 million of the accrual because of court decisions which clarify the circumstances in which we are required to pay certain levies. The reversal was recorded as a benefit to cost of goods sold in the Condensed Consolidated Statements of Operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Imation Corp., a Delaware corporation, is a leading global technology company dedicated to helping people and organizations store, protect and connect their digital world. Our portfolio of data storage and security products, electronics and accessories reaches customers in more than 100 countries through our global distribution network. Imation Corp.’s global brand portfolio includes the Imation, Memorex, XtremeMac, TDK Life on Record and MXI Security brands. As used herein, the terms “Imation,” “Company,” “ we,” “us” or “our” mean Imation Corp. and its subsidiaries unless the context indicates otherwise.

Executive Summary

Consolidated Results of Operations for the Six Months Ended June 30, 2011

• Net revenue from continuing operations of $639.5 million for the six months ended June 30, 2011 was down 11.2 percent compared with $720.2 million in the same period last year.

• Operating loss was $12.7 million for the six months ended June 30, 2011, compared with operating loss of $23.6 million in the same period last year.

• Diluted loss per share from continuing operations was $0.52 for the six months ended June 30, 2011, compared with diluted loss per share from continuing operations of $0.48 for the same period last year.

Cash Flow/Financial Condition for the Six Months Ended June 30, 2011

• Cash and cash equivalents totaled $257.8 million as of June 30, 2011, compared with $304.9 million at December 31, 2010. The decrease was primarily attributable to acquisition related payments, pension contributions, annual incentive payments to employees, restructuring payments, treasury stock purchases and other working capital changes.

• Cash flow used in operating activities was $15.3 million for the six months ended June 30, 2011, compared with cash provided by operating activities of $102.5 million in the same period last year.

Results of Operations

Net Revenue

	Three Months Ended						Six Months Ended
	June 30,				Percent Change		June 30,				Percent Change
(Dollars in millions)	2011		2010				2011		2010
Net revenue	$	323.0	$	354.4	(8.9	)%	$	639.5	$	720.2	(11.2	)%

Our worldwide revenue for the three months ended June 30, 2011 was negatively impacted by overall volume declines of eight percent and overall price erosion of seven percent, offset partially by a favorable foreign currency impact of six percent. From a product perspective, the revenue decrease was due to declines in traditional storage products of $26.5 million, including $23.9 million from optical products, as well as $11.4 million from electronics and accessories due to the planned rationalization of certain product lines, offset partially by an increase of $6.5 million from secure and scalable storage products.

Our worldwide revenue for the six months ended June 30, 2011 was negatively impacted by overall price erosion of eight percent and overall volume declines of seven percent, offset partially by a favorable foreign currency impact of four percent. From a product perspective, the revenue decrease was due to declines in traditional storage products of $67.2 million, including $53.6 million from optical products and $6.4 million from magnetic products, as well as $15.2 million from electronics and accessories, offset slightly by an increase of $1.7 million from secure and scalable storage products.

Gross Profit

	Three Months Ended								Six Months Ended
	June 30,						Percent Change		June 30,						Percent Change
(Dollars in millions)	2011			2010					2011			2010
Gross profit	$	54.0		$	58.5		(7.7	)%	$	108.0		$	120.2		(10.1	)%
Gross margin	16.7		%	16.5		%			16.9		%	16.7		%

Gross profit decreased for the three and six months ended June 30, 2011, compared to the same periods last year primarily

20

due to lower net revenues and lower gross profit on optical products which were a result of optical supplier cost increases of approximately $3.6 million for the three months ended June 30, 2011 and reduced vendor rebates of approximately $2.2 million and $2.9 million for the three and six months ended June 30, 2011 offset partially by levy benefits of $3.4 million and $5.5 million for the three and six months ended June 30, 2011, respectively. Gross margins increased slightly over the three and six months ended June 30, 2011, compared to the same periods last year primarily due to increased gross margins on secure and scalable storage products substantially offset by lower gross margins on optical products which were a result of optical supplier cost increases and reduced vendor rebates offset partially by levy benefits.

Selling, General and Administrative (SG&A)

	Three Months Ended								Six Months Ended
	June 30,						Percent Change		June 30,						Percent Change
(Dollars in millions)	2011			2010					2011			2010
Selling, general and administrative	$	47.9		$	51.5		(7.0	)%	$	98.1		$	104.6		(6.2	)%
As a percent of revenue	14.8		%	14.5		%			15.3		%	14.5		%

SG&A expense decreased for the three and six months ended June 30, 2011, compared with the same periods last year, primarily related to a reversal of a bad debt reserve of $2.7 million as well as ongoing restructuring and cost control actions related to our previously announced restructuring programs.

During the remainder of 2011 we plan to continue to invest in organic growth programs to expand sales and marketing coverage for the value added reseller and original equipment manufacturer (OEM) channels as well as expand our international operations, particularly in China. These investments are expected to increase our SG&A expense compared to 2010.

Research and Development (R&D)

	Three Months Ended								Six Months Ended
	June 30,						Percent Change		June 30,						Percent Change
(Dollars in millions)	2011			2010					2011			2010
Research and development	$	5.0		$	3.9		28.2	%	$	9.7		$	8.3		16.9	%
As a percent of revenue	1.5		%	1.1		%			1.5		%	1.2		%

R&D expense increased for the three and six months ended June 30, 2011, compared with the same periods last year, due to concentrated focus on the development of our secure and scalable storage products.

During the remainder of 2011 we plan to continue to invest in additional R&D activities in four core product technology areas: secure storage, scalable storage, wireless/connectivity and magnetic tape. These investments are expected to result in an increase of up to 30 percent in R&D compared to 2010.

Goodwill Impairment

	Three Months Ended					Six Months Ended
	June 30,				Percent Change	June 30,				Percent Change
(Dollars in millions)	2011		2010			2011		2010
Goodwill impairment	$	—	$	23.5	NM	$	1.6	$	23.5	(93.2	)%

NM - Not Meaningful

On February 28, 2011, we acquired substantially all of the assets of BeCompliant Corporation (doing business as Encryptx). The purchase price allocation resulted in goodwill of $1.6 million relating to this acquisition, made up of expected strategic synergies and intangible assets that do not qualify for separate recognition. The goodwill was allocated to our existing Americas-Commercial reporting unit. Goodwill is considered impaired when its carrying amount exceeds its implied fair value. As of March 31, 2011, the carrying amount of all of our reporting units significantly exceeded their fair value and we performed an impairment test. Based on the goodwill test performed as of March 31, 2011, we determined that the carrying amount of the goodwill in the Americas-Commercial reporting unit, including the assets of Encryptx, exceeded the implied fair value and, therefore, the goodwill was fully impaired on March 31, 2011. See Note 4 to the Condensed Consolidated Financial Statements for further information regarding this acquisition.

We made certain changes to our business segments effective in the second quarter of 2010. Our reporting units for goodwill are our operating segments with the exception of the Americas segment which is further divided between the

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Americas-Consumer and Americas-Commercial reporting units as determined by sales channel. As a result of the segment change, the $23.5 million of goodwill which was previously allocated to the Electronics Products segment was merged into the Americas-Consumer reporting unit. The Americas-Consumer reporting unit had a fair value that was significantly less than its carrying amount prior to the combination, which is a triggering event for an interim goodwill impairment test. Based on the goodwill test performed as of June 30, 2010, we determined that the carrying amount of the reporting unit significantly exceeded its fair value and that the $23.5 million of goodwill was fully impaired.

Restructuring and Other

	Three Months Ended					Six Months Ended
	June 30,				Percent Change	June 30,				Percent Change
(Dollars in millions)	2011		2010			2011		2010
Restructuring and other	$	10.4	$	3.4	NM	$	11.3	$	7.4	52.7	%

NM - Not Meaningful

Restructuring and other expense for the three and six months ended June 30, 2011 was related to our 2011 corporate strategy restructuring program and included severance related costs of $0.7 million and $1.3 million, respectively, lease termination costs of $0.2 million and $0.4 million, respectively, and other charges of $9.5 million and $9.6 million, respectively. Other charges are primarily related to the demolition of our Camarillo, California facility of $7.0 million, a pension settlement of $1.0 million and acquisition and transition costs of $1.2 million. During the remainder of 2011 we expect to incur restructuring charges in a range of approximately $10 million to $30 million related to our outstanding restructuring programs.

Restructuring and other expense for the three and six months ended June 30, 2010 was mainly related to our 2008 corporate redesign restructuring program and included severance related costs of $3.3 million and $4.9 million, respectively, and lease termination costs of $0.1 and $0.3 million, respectively. Other expenses for the six months ended June 30, 2010 included costs associated with the announced retirement of our former Vice Chairman and Chief Executive Officer. Specifically, a severance related charge of $1.4 million and a charge of $0.8 million related to the accelerated vesting of his unvested options and restricted stock.

Operating (Loss) Income

	Three Months Ended								Six Months Ended
	June 30,						Percent Change		June 30,						Percent Change
(Dollars in millions)	2011			2010					2011			2010
Operating loss	$	(9.3	)	$	(23.8	)	(60.9	)%	$	(12.7	)	$	(23.6	)	(46.2	)%
As a percent of revenue	(2.9		)%	(6.7		)%			(2.0		)%	(3.3		)%

Operating loss decreased for the three months ended June 30, 2011, compared with the same period last year, primarily due to a goodwill impairment charge of $23.5 million during the three months ended June 30, 2010 and lower gross profit of $4.5 million, partially offset by higher restructuring charges of $6.9 million during the three months ended June 30, 2011, each as discussed above.

Operating loss decreased for the six months ended June 30, 2011, compared with the same period last year, primarily due to lower goodwill impairment charges of $21.9 million and lower operating expenses of $5.1 million, partially offset by lower gross profit of $12.2 million and higher restructuring and other expenses of $3.9 million, each as discussed above.

Other (Income) and Expense

	Three Months Ended								Six Months Ended
	June 30,						Percent Change		June 30,						Percent Change
(Dollars in millions)	2011			2010					2011			2010
Interest income	$	(0.2	)	$	(0.2	)	—	%	$	(0.4	)	$	(0.4	)	—	%
Interest expense	1.0			1.0			—	%	1.9			2.1			(9.5	)%
Other, net	1.7			2.1			(19.0	)%	3.1			5.0			(38.0	)%
Total	2.5			2.9			(13.8	)%	4.6			6.7			(31.3	)%
As a percent of revenue	0.8		%	0.8		%			0.7		%	0.9		%

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Other expense decreased for the six months ended June 30, 2011, compared to the same period last year, due to decreases in foreign currency losses of $1.1 million and declines in other expenses of $0.4 million.

Income Tax Provision (Benefit)

	Three Months Ended							Six Months Ended
	June 30,						Percent Change	June 30,						Percent Change
(Dollars in millions)	2011			2010				2011			2010
Income tax provision (benefit)	$	0.7		$	(11.0	)	NM	$	2.4		$	(12.1	)	NM
Effective tax rate	(5.9		)%	41.2		%		(13.9		)%	39.9		%

NM - Not Meaningful

The change in the effective rate of income tax provision (benefit) for the three and six months ended June 30, 2011 compared with the same periods last year, was due primarily to a full valuation allowance on U.S. deferred tax assets and the mix of taxable income/loss by country. See Note 10 to the Condensed Consolidated Financial Statements for further information about the valuation allowance related to the U.S. deferred tax assets.

Segment Results

Our business is organized, managed and internally and externally reported as segments differentiated by the regional markets we serve: Americas, Europe, North Asia and South Asia. Each of these geographic segments has responsibility for selling all of our product lines.

We evaluate segment performance based on revenue and operating income. Revenue for each segment is generally based on customer location where the product is shipped. The operating income reported in our segments excludes corporate and other unallocated amounts. Although such amounts are excluded from the business segment results, they are included in reported consolidated earnings. Corporate and unallocated amounts include litigation settlement expense, goodwill impairment expense, research and development expense, corporate expense, inventory write-offs, stock-based compensation expense and restructuring and other expenses which are not allocated to the segments.

We have three major product categories: traditional storage, secure and scalable storage, and electronics and accessories. During the three months ended June 30, 2011, we changed the name of the emerging storage product category to secure and scalable storage to better reflect our direction and future product offerings.

Information related to our segments is as follows:

Americas

	Three Months Ended								Six Months Ended
	June 30,						Percent Change		June 30,						Percent Change
(Dollars in millions)	2011			2010					2011			2010
Net revenue	$	142.8		$	181.2		(21.2	)%	$	285.9		$	342.9		(16.6	)%
Operating income	1.1			9.4			(88.3	)%	3.1			18.5			(83.2	)%
As a percent of revenue	0.8		%	5.2		%			1.1		%	5.4		%

The Americas segment is our largest segment comprising 44.2 percent of our revenue for the three months ended June 30, 2011. The Americas segment revenue decreased for the three months ended June 30, 2011, compared with the same period last year, due to overall volume declines of 18 percent and price erosion of 4 percent. From a product perspective, the decrease in revenue was driven primarily by lower revenue from optical products of $18.3 million, electronics and accessories of $13.8 million and magnetic products of $6.9 million. Revenue decreased for the six months ended June 30, 2011, compared with the same period last year, due to overall volume declines of 12 percent and price erosion of 5 percent. From a product perspective, the decrease in revenue was driven primarily by the lower revenue from optical products of $27.5 million, lower revenue of $19.9 million from electronics and accessories due to planned rationalization of certain product lines and lower revenue from magnetic products of $10.4 million.

Operating income decreased for the three and six months ended June 30, 2011, compared with the same period last year, driven mainly by lower revenue and lower gross margin on optical and magnetic products, offset partially by lower SG&A costs.

Europe

23

	Three Months Ended								Six Months Ended
	June 30,						Percent Change		June 30,						Percent Change
(Dollars in millions)	2011			2010					2011			2010
Net revenue	$	64.1		$	64.5		(0.6	)%	$	126.4		$	151.2		(16.4	)%
Operating income	2.3			(1.5		)	NM		3.2			0.3			NM
As a percent of revenue	3.6		%	(2.3		)%			2.5		%	0.2		%

NM - Not Meaningful

The Europe segment comprised 19.9 percent of our revenue for the three months ended June 30, 2011. The Europe segment revenue remained relatively flat for the three months ended June 30, 2011, compared with the same period last year, due to overall volume decreases of 13 percent and price erosion of 3 percent, substantially offset by a favorable foreign currency impact of 16 percent. From a product perspective, the change in revenue was driven by lower revenue from optical products of $5.4 million, offset by higher revenue from magnetic products of $3.7 million and secure and scalable storage products of $2.9 million. Revenue decreased for the six months ended June 30, 2011, compared with the same period last year, due to overall volume decreases of 20 percent and price erosion of 2 percent, offset partially by a favorable foreign currency impact of 6 percent. From a product perspective, the decrease in revenue was primarily driven by declines in optical products of $21.2 million.

Operating income increased for the three and six months ended June 30, 2011, compared with the same periods last year, driven by the higher gross margins on optical products primarily due accrual reversals of $3.4 million and $5.5 million, respectively, related to levies we believe no longer need to be paid, as well as lower SG&A costs.

North Asia

	Three Months Ended								Six Months Ended
	June 30,						Percent Change		June 30,						Percent Change
(Dollars in millions)	2011			2010					2011			2010
Net revenue	$	80.1		$	73.0		9.7	%	$	154.3		$	154.3		—	%
Operating income	6.1			2.4			154.2	%	9.4			5.5			70.9	%
As a percent of revenue	7.6		%	3.3		%			6.1		%	3.6		%

The North Asia segment comprised 24.8 percent of our revenue for the three months ended June 30, 2011. The North Asia segment revenue increased for the three months ended June 30, 2011, compared with the same period last year, due to overall volume increases of 18 percent and a favorable foreign currency impact of 12 percent, offset partially by price erosion of 20 percent. From a product perspective, the increase in revenue was driven primarily by higher revenue from magnetic products of $3.6 million and higher revenue from secure and scalable storage products of $1.8 million. Revenue was higher due to the impacts on our competitors from the earthquake and related events in Japan in April 2011. Revenue remained flat for the six months ended June 30, 2011 compared with the same period last year, due to overall volume increases of 11 percent and a favorable foreign currency impact of 9 percent, substantially offset by price erosion of 20 percent. From a product perspective, revenue increased from flash products of $5.6 million and magnetic products of $3.7 million, but was offset primarily by decreases in revenue from hard disk drives of $4.7 million, optical products of $2.1 million and other traditional storage products of $1.6 million.

Operating income increased for the three months ended June 30, 2011, compared with the same period last year, driven by a reversal of a bad debt reserve of $2.7 million as well as increased revenue and higher gross margins on secure and scalable storage products. Operating income increased for the six months ended June 30, 2011, compared with the same period last year, driven by a reversal of a bad debt reserve of $2.7 million as well as improved gross margins across all major products, especially secure and scalable storage products.

South Asia

24

	Three Months Ended								Six Months Ended
	June 30,						Percent Change		June 30,						Percent Change
(Dollars in millions)	2011			2010					2011			2010
Net revenue	$	36.0		$	35.7		0.8	%	$	72.9		$	71.8		1.5	%
Operating income	0.5			1.0			(50.0	)%	0.9			2.0			(55.0	)%
As a percent of revenue	1.4		%	2.8		%			1.2		%	2.8		%

The South Asia segment comprised 11.1 percent of our revenue for the three months ended June 30, 2011. The South Asia segment revenue increased slightly for the three months ended June 30, 2011, compared with the same period last year, due to a favorable foreign currency impact of 11 percent and overall volume increases of 1 percent, substantially offset by price erosion of 11 percent. From a product perspective, the increase in revenue was driven by higher revenue from electronics and accessories of $1.2 million and relatively stable revenue from traditional and secure and scalable storage products. Revenue increased for the six months ended June 30, 2011, compared with the same period last year, due to a favorable foreign currency impact of 8 percent and overall volume increases of 5 percent, offset partially by price erosion of 11 percent. From a product perspective, the increase in revenue was driven by increased revenue from electronics and accessories of $2.7 million and flash products of $2.3 million, offset partially by decreases in optical products of $2.9 million.

Operating income decreased for the three months ended June 30, 2011, compared with the same period last year, driven by lower gross margins on traditional storage products and modestly increased SG&A costs, partially offset by increased gross margins on secure and scalable storage products. Operating income decreased for the six months ended June 30, 2011, compared with the same period last year, primarily driven by modestly increased SG&A costs.

Corporate and Unallocated

	Three Months Ended								Six Months Ended
	June 30,						Percent Change		June 30,						Percent Change
(Dollars in millions)	2011			2010					2011			2010
Operating costs	$	(19.3	)	$	(35.1	)	(45.0	)%	$	(29.3	)	$	(49.9	)	(41.3	)%

The corporate and unallocated operating loss includes amounts which are not allocated to the business units in management’s evaluation of segment performance such as goodwill charges, R&D expense, corporate expense, stock-based compensation expense and restructuring and other expense. The corporate and unallocated operating loss decreased for the three and six months ended June 30, 2011, compared with the same periods last year, driven primarily by a goodwill impairment charge during 2010 of $23.5 million, offset partially by increased restructuring and other expense due to the loss relating to the demolition of our Camarillo, California facility of $7.0 million in the current period.

Impact of Changes in Foreign Currency Rates

We have a market presence in more than 100 countries and we sell products on a local currency basis through a variety of distribution channels. We source optical, flash and other finished goods from manufacturers located primarily in Asia, although much of this sourcing is on a U.S. dollar basis. During the three months ended March 31, 2011 we transitioned manufacturing operations for magnetic products from our Weatherford, Oklahoma facility to sourcing these products on a Japanese Yen basis from TDK Corporation. Additionally, comparisons of revenue and gross profit from foreign countries are subject to various fluctuations due to the impact of translating results at differing exchange rates in different periods.

Changes in foreign currency translation rates for the three months ended June 30, 2011 benefited worldwide revenue by six percent compared with one percent for the same period last year. Changes in foreign currency translation rates for the six months ended June 30, 2011 benefited worldwide revenue by four percent compared with one percent for the same period last year. The impact on profit is more difficult to determine due to the influence of other factors that we believe are also impacted by currency rate changes.

Our foreign currency hedging program attempts to manage some of the foreign currency risks over near term periods; however, these risk management activities cannot ensure that the program will offset more than a portion of the adverse financial impact resulting from unfavorable movements in foreign exchange rates or that medium and longer term effects of exchange rates will not be significant (see Part 1, Item 3. Quantitative and Qualitative Disclosures about Market Risk in this Form 10-Q).

Financial Position

Our cash and cash equivalents balance as of June 30, 2011 was $257.8 million, a decrease of $47.1 million from

25

$304.9 million as of December 31, 2010. The decrease was primarily attributable to acquisition related activities, pension contributions, annual incentive payments to employees, restructuring payments, treasury stock purchases and other working capital changes.

Our accounts receivable balance as of June 30, 2011 was $219.8 million, a decrease of $39.0 million from $258.8 million as of December 31, 2010 as a result of lower sales in the first half of 2011. Days sales outstanding was 57 days as of June 30, 2011, unchanged from December 31, 2010. Days sales outstanding is calculated using the count-back method, which calculates the number of days of most recent revenue that is reflected in the net accounts receivable balance.

Our inventory balance as of June 30, 2011 was $221.8 million, an increase of $18.5 million from $203.3 million as of December 31, 2010. Days of inventory supply was 79 days as of June 30, 2011, up 10 days from December 31, 2010. These increases were primarily a result of converting optical inventory from consignment to owned. Days of inventory supply is calculated using the current period inventory balance divided by an estimate of the inventoriable portion of cost of goods sold expressed in days.

Our accounts payable balance as of June 30, 2011 was $200.9 million, a decrease of $18.3 million from $219.2 million as of December 31, 2010. The decrease in accounts payable was primarily due to reduced payment terms related to payments in the normal course of business coupled with reduced purchases.

Our other current liabilities balance as of June 30, 2011 was $138.9 million, a decrease of $33.4 million from $172.3 million as of December 31, 2010. The decrease was primarily due to the payment associated with the TDK value added tax liability which was paid from restricted cash, the timing of annual payments in programs associated with rebate accruals and restructuring payments primarily related to the close of our Weatherford, Oklahoma facility.

In some markets, primarily Europe and Canada, the sale of recordable optical media is subject to a private copying levy, which is an extra charge on purchases of these products. Imation collects the levies upon sale, and submits payment of the levies to copyright collective non-government agencies for distribution to content providers as “fair compensation” for the harm caused to them due to private copies made by natural persons of protected works. For several years the amount of the levy in Europe has been in question and the subject of various litigation and law making activities. We have continued to accrue the levies but are awaiting resolution before submitting some of the required payments. Depending on the final outcome of the various litigation and law making activities, if some amount less than what we have accrued does not need to be paid, this amount will be recorded as a reduction to our cost of goods sold in the period that the resolution is determined. During the three and six months ended June 30, 2011, we reversed $3.4 million and $5.5 million, respectively, of the accrual because of court decisions which clarify the circumstances in which we are required to pay certain levies. The reversal was recorded as a benefit to cost of goods sold in the Condensed Consolidated Statements of Operations.

Liquidity and Capital Resources

Cash Flows Provided by Operating Activities:

	Six Months Ended
	June 30,
(Dollars in millions)	2011			2010
Net loss	$	(19.7	)	$	(18.3	)
Adjustments to reconcile net income to net cash provided by operating activities	39.9			43.7
Changes in operating assets and liabilities	(35.5		)	77.1
Net cash (used in) provided by operating activities	$	(15.3	)	$	102.5

Cash flows from operating activities can fluctuate significantly from period to period as many items can significantly impact cash flows. Cash payments during the six months ended June 30, 2011 included $10.7 million of pension funding, $7.8 million of restructuring payments primarily related to the close of our Weatherford, Oklahoma facility, $7.1 million related to our 2010 annual incentive program and $2.6 million related to a litigation settlement.

Cash provided by operating activities of $102.5 million for the six months ended June 30, 2010, was driven by a net loss of $18.3 million as adjusted by the non-cash goodwill impairment charge of $23.5 million, cash payments of approximately $10.0 million related to our 2009 annual incentive program, $6.9 million under our restructuring programs and $2.4 million of pension funding.

Cash Flows Used in Investing Activities:

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	Six Months Ended
	June 30,
(Dollars in millions)	2011			2010
Capital expenditures	$	(4.5	)	$	(3.5	)
Acquisitions	(25.5		)	—
License agreement payment	—			(5.0		)
Other, net	—			0.1
Net cash used in investing activities	$	(30.0	)	$	(8.4	)

Cash used in investing activities for the six months ended June 30, 2011, included $4.5 million of capital expenditures and $25.5 million related to acquisition activities. See Note 4 to the Condensed Consolidated Financial Statements for further information regarding our acquisitions. Cash used in investing activities for the six months ended June 30, 2010, included $3.5 million of capital expenditures and $5.0 million to extend our license agreement with ProStor Systems related to RDX removable hard disk systems.

Cash Flows Used in Financing Activities:

	Six Months Ended
	June 30,
(Dollars in millions)	2011			2010
Purchase of treasury stock	$	(6.8	)	$	—
Exercise of stock options	0.6			—
Net cash used in financing activities	$	(6.2	)	$	—

On January 28, 2008, the Board of Directors authorized a share repurchase program increasing the total outstanding authorization to 3.0 million shares of common stock. During the six months ended June 30, 2011 we repurchased 0.7 million shares. We did not repurchase shares during 2010. We have repurchased a total of 1.4 million shares under the program and 1.6 million shares remain outstanding under the authorization as of June 30, 2011.

On March 30, 2006, we entered into a credit agreement. The credit agreement was most recently amended on June 28, 2011 and expires March 29, 2013. The credit agreement includes a senior revolving credit facility amount of $200 million, including sublimits of $150 million in the United States and $50 million in Europe. Advances are limited to the lesser of the sublimit(s) and the borrowing base as defined by the agreement. As of June 30, 2011, our total availability under the credit facility was $124.3 million. The credit agreement is secured by our Oakdale headquarters and all of our personal property and the personal property of certain other subsidiaries.

Borrowings under the credit agreement bare a variable rate of interest which during the three and six months ended June 30, 2011 would have been approximately 5.0 percent. However, we did not have borrowings under the credit agreement during the six months ended June 30, 2011.

The credit agreement contains covenants which are customary for similar credit arrangements, including covenants relating to financial reporting and notification; payment of indebtedness, taxes and other obligations; compliance with applicable laws; and limitations regarding additional liens, indebtedness, certain acquisitions, investments and dispositions of assets. We were in compliance with all covenants as of June 30, 2011. The credit agreement also contains a conditional financial covenant that requires us to have a Consolidated Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) of not less than 1.20 to 1.00 during certain periods described in the Amended Credit Agreement. However, at June 30, 2011 that conditional financial covenant did not apply.

Our liquidity needs for the remaining six months of 2011 include the following: restructuring payments of up to $20 million, capital expenditures of approximately $6 million, a litigation settlement payment of $8.3 million, pension funding of approximately $1 million to $3 million, operating lease payments of approximately $5 million, any amounts associated with strategic acquisitions, any amounts associated with organic investment opportunities and any amounts associated with the repurchase of common stock under the authorization discussed above. We expect that cash and cash equivalents, together with cash flow from operations and availability of borrowings under our current sources of financing, will provide liquidity sufficient to meet these needs and for our operations.

Contractual Obligations

A table of our contractual obligations was provided in Item 7 in our Annual Report on Form 10-K for the fiscal year ended

27

December 31, 2010. There were no significant changes to our contractual obligations for the first six months of 2011.

Fair Value Measurements

See Note 11 to the Condensed Consolidated Financial Statements in Part I, Item 1 herein for further information.

Critical Accounting Policies and Estimates

 A discussion of the Company’s critical accounting policies was provided in Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010. There were no significant changes to these accounting policies for the first six months of 2011.

Recent Accounting Pronouncements

 See Note 2 to the Condensed Consolidated Financial Statements in Part I, Item 1 herein for further information.

Forward-Looking Statements and Risk Factors

We may from time to time make written or oral forward-looking statements with respect to our future goals, including statements contained in this Form 10-Q, in our other filings with the Securities and Exchange Commission and in our reports to shareholders.

Certain information which does not relate to historical financial information may be deemed to constitute forward-looking statements. The words or phrases “is targeting,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “believe” or similar expressions identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause our actual results in the future to differ materially from our historical results and those presently anticipated or projected. We wish to caution investors not to place undue reliance on any such forward-looking statements. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements to reflect events or circumstances arising after such date. Risk factors include our ability to successfully implement our strategy; our ability to grow our business in new products with profitable margins and the rate of revenue decline for certain existing products; the ready availability and price of energy and key raw materials or critical components; our ability to pass along price increases to our customers; changes in European law or practice related to the imposition or collectability of optical levies; our potential dependence on third parties for new product introductions or technologies in order to introduce our own new products; our ability to introduce new offerings in a timely manner either independently or in association with TDK, OEMs and other third parties and the market acceptance of newly introduced product and service offerings; continuing uncertainty in global and regional economic conditions; our ability to identify, integrate and realize the expected benefits from any acquisition which has occurred or may occur in connection with our strategy; our ability to realize the benefits from our global sourcing and development strategy for magnetic data storage products and the related restructuring; the volatility of the markets in which we operate; foreign currency fluctuations; our ability to source and deliver products to our customers at acceptable quality, volume and cost levels; significant changes in discount rates and other assumptions used in the valuation of our pension plans; changes in tax laws, regulations and results of inspections by various tax authorities; our ability to meet our revenue growth, gross margin and earnings targets; our ability to secure adequate supply of certain high demand products at acceptable prices; our ability to efficiently source, warehouse and distribute our products globally; a material change in customer relationships or in customer demand for products; the future financial and operating performance of major customers and industries served; our ability to successfully defend our intellectual property rights and the ability or willingness of our suppliers to provide adequate protection against third party intellectual property or product liability claims; the possibility that our long-lived assets for any goodwill that we acquire in the future may become impaired; the outcome of any pending or future litigation; and the volatility of our stock price due to our results or market trends, as well as various factors set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and from time to time in our filings with the Securities and Exchange Commission.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Except for the paragraph noted below, there has been no material change since our Annual Report on Form 10-K for the year ended December 31, 2010. For further information, see Item 7A. Quantitative and Qualitative Disclosures about Market Risk included in our Annual Report on Form 10-K for the year ended December 31, 2010.

 As of June 30, 2011, we had $203.0 million notional amount of foreign currency forward and option contracts of which $80.0 million hedged recorded balance sheet exposures. This compares to $293.1 million notional amount of foreign currency forward and option contracts as of December 31, 2010, of which $47.1 million hedged recorded balance sheet exposures. An immediate adverse change of 10 percent in quarter-end foreign currency exchange rates with all other variables (including interest rates) held constant would reduce the fair value of foreign currency contracts outstanding as of June 30, 2011 by $5.9 million.

Item 4. Controls and Procedures.

 Based on an evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) as of June 30, 2011, the end of the period covered by this report, the President and Chief Executive Officer, Mark E. Lucas, and the Senior Vice President and Chief Financial Officer, Paul R. Zeller, have concluded that the disclosure controls and procedures were effective.

During the quarter ended June 30, 2011, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

In the normal course of business, we periodically enter into agreements that incorporate general indemnification language. Performance under these indemnities would generally be triggered by a breach of terms of the contract or by a third-party claim. There has historically been no material losses related to such indemnifications. In accordance with accounting principles generally accepted in the United States of America, we record a liability in our Condensed Consolidated Financial Statements for these actions when a loss is known or considered probable and the amount can be reasonably estimated.

We are the subject of various pending or threatened legal actions in the ordinary course of our business. All such matters are subject to many uncertainties and outcomes that are not predictable with assurance. Additionally, our electronics and accessories business is subject to allegations of patent infringement by our competitors as well as by non-practicing entities (NPEs), sometimes referred to as “patent trolls,” who may seek monetary settlements from us, our competitors, suppliers and resellers. Consequently, as of June 30, 2011, we are unable to ascertain the ultimate aggregate amount of any monetary liability or financial impact that we may incur with respect to these matters. While these matters could materially affect operating results depending upon the final resolution in future periods, it is our opinion that after final disposition, any monetary liability beyond that provided in the Condensed Consolidated Balance Sheet as of June 30, 2011 would not be material to our Condensed Consolidated Financial Statements.

On June 19, 2009, Advanced Research Corp. (ARC) sued Imation in Ramsey County District court for breach of contract relating to a supply agreement under which we purchase our requirements for magnetic heads to write servo patterns on magnetic tape prior to sale of the finished cartridges, requesting the court to order that Imation pay damages and return the purchased heads to ARC. ARC is alleging that we misrepresented the volumes of heads that we would require, and that ARC invested in a new facility in reliance on our forecasts. ARC has claimed damages in excess of $27.2 million and we have filed counterclaims against ARC for its failure to comply with the supply agreement and other agreements, claiming damages in excess of $8.5 million. In March 2010, both Imation and ARC filed motions for partial summary judgment, which motions were denied by the court on July 6, 2010. On July 27, 2010, the court granted ARC's motion to amend its complaint to add a claim for trade secret misappropriation. On March 29, 2011, Imation moved for summary judgment on the claim of trade secret misappropriation. On July 21, 2011, the court granted Imation's summary judgment motion to dismiss ARC's trade secret misappropriation claim. A pre-trial settlement conference has been set for July 2011 and a trial date has been set for October 2011. Imation believes that the ultimate resolution of this legal proceeding will not have a material adverse effect on the Company's financial condition, results of operations or cash flows.

Item 1A. Risk Factors.

 There has been no material change in the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010. For further information, see Item 1A. “Risk Factors” included in our Annual Report on Form 10-K

29

for the fiscal year ended December 31, 2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 (a) - (b)

Not applicable

(c) Issuer Purchases of Equity Securities

					(c)
				Total Number of	Maximum Number
	(a)	(b)		Shares Purchased	of Shares that May
	Total Number	Average		as Part of Publicly	Yet Be Purchased
	of Shares	Price Paid		Announced Plans	Under the Plan or
Period	Purchased	per Share		or Programs	Programs
April 1, 2011 - April 30, 2011	10,511	$	11.64	—	2,124,184
May 1, 2011 - May 31, 2011	417,468	9.38		365,300	1,758,884
June 1, 2011 - June 30, 2011	129,307	9.69		129,143	1,629,741
Total	557,286	$	9.69	494,443	1,629,741

(a) The purchases in this column include shares repurchased as part of our publicly announced programs and include 62,843 shares that were surrendered to Imation by participants in our stock-based compensation plans (the Plans) to satisfy the tax obligations related to the vesting of restricted stock awards.

(b) The average price paid in this column includes shares repurchased as part of our publicly announced programs and shares that were surrendered to Imation by participants in the Plans to satisfy the tax obligations related to the vesting of restricted stock awards.

(c) Our Board of Directors has authorized the repurchase of a total of 3.0 million shares of which we have repurchased 1.4 million shares of common stock and have remaining authorization to repurchase up to 1.6 million shares. The authorization has no expiration date.

Item 3. Defaults Upon Senior Securities.

 Not Applicable

Item 4. (Removed and Reserved)

Item 5. Other Information.

 Not Applicable

Item 6. Exhibits.

 The following documents are filed as part of this report:

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Exhibit Number	Description of Exhibit
10.1	Director Compensation Program Effective May 4, 2005 (As amended May 4, 2011)
10.2	Amended and Restated Severance Agreement of John P. Breedlove, effective June 20, 2011
10.3	First Amendment to Amended and Restated Credit Agreement dated as of June 28, 2011
10.4	Imation Corp. 2011 Stock Incentive Plan (incorporated by reference to Exhibit 4.7 to Imation's Registration Statement on Form S-8 (File No. 333-173903) filed on May 4, 2011)
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from Imation Corp.’s Quarterly Report on Form 10-Q for the period ended June 30, 2011, filed with the SEC on August 9, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010, (ii) the Consolidated Balance Sheets at June 30, 2011 and December 31, 2010, (iii) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010, and (iv) Notes to Condensed Consolidated Financial Statements.*

*Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filings.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Imation Corp.
Date:	August 9, 2011	/s/ Paul R. Zeller
		Paul R. Zeller
		Senior Vice President and Chief Financial Officer (duly authorized officer and principal financial officer)

32

EXHIBIT INDEX

The following exhibits are filed as part of this report:

Exhibit Number	Description of Exhibit
10.1	Director Compensation Program Effective May 4, 2005 (As amended May 4, 2011)
10.2	Amended and Restated Severance Agreement of John P. Breedlove, effective June 20, 2011
10.3	First Amendment to Amended and Restated Credit Agreement dated as of June 28, 2011
10.4	Imation Corp. 2011 Stock Incentive Plan (incorporated by reference to Exhibit 4.7 to Imation's Registration Statement on Form S-8 (File No. 333-173903) filed on May 4, 2011)
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial information from Imation Corp.’s Quarterly Report on Form 10-Q for the period ended June 30, 2011, filed with the SEC on August 9, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010, (ii) the Condensed Consolidated Balance Sheets at June 30, 2011 and December 31, 2010, (iii) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010, and (iv) Notes to Condensed Consolidated Financial Statements.*

*Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filings.

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EX-10

Exhibit 10.1

IMATION CORP.

DIRECTORS COMPENSATION PROGRAM

EFFECTIVE MAY 4, 2005

(As amended May 4, 2011)

SECTION 1. PURPOSE

(a)The purpose of the Program is to attract and retain well-qualified persons for service as nonemployee directors of the Company and to promote identity of interest between directors and stockholders of the Company. The Program is designed and intended to comply with Rule 16b-3 under the Securities Exchange Act of 1934, as amended, as such Rule may be amended from time to time, and shall be interpreted in a manner consistent with the requirements thereof, as now or hereafter construed, interpreted and applied by regulations, rulings and cases.

(b)The Program is also intended to comply in form and operation with the requirements of Section 409A of the Code, or an exception thereto.

SECTION 2. DEFINITIONS

The following words and phrases have the meaning indicated below, unless the context clearly indicates otherwise.

(a)“Affiliate” means any entity that, together with the Company, is treated as a single employer under Code section 414(b) or (c). For purposes of determining whether a Termination of Employment has occurred, the term Affiliate will be determined by applying Code section 1563(a)((1), (2) and (3) for purposes of determining a controlled group of corporations under Code section 414(b) and in applying Treas. Reg. Section 1.414(c)-2 for purposes of determining trades or businesses that are under common control for purposes of Code section 414(c), the phrase “at least 50 percent” will be used instead of “at least 80 percent” each place it appears.

(b)“Accounting Date” means the first business day following the annual meeting of stockholders of the Company, or, if no annual meeting is held during a calendar year, it means December 31.

(c)“Basic Fee” means the annual retainer payable to an Eligible Director at the annual rate in effect on the Accounting Date for such Eligible Director's services on the Board (exclusive of any Chairperson Fee, Non-Executive Chairman Fee or Meeting Fees.)

(d)“Board” means the Board of Directors of the Company.

(e)“Chairperson Fee” means the annual retainer payable to an Eligible Director at the annual rate in effect on the Accounting Date for such Eligible Director's services as the chairperson of any committee of the Board.

3

(f)“Change in Control” has the meaning given it in Section 8(b) to the extent it is consistent with and satisfies the definition of “Change of Control” under Code section 409A.

(g)“Change in Control Price” of the Common Stock shall equal the higher of (i) if applicable, the price paid for the Common Stock in the transaction constituting a Change in Control and (ii) the Fair Market Value of the Common Stock as of the last trading day preceding the date of the Change in Control.

(h)“Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations or binding rules promulgated thereunder.

(i)“Committee” means the Compensation Committee of the Board.

(j)“Common Stock” means the common stock, par value $.01 per share, of the Company.

(k)“Company” means Imation Corp.

(l)“Dividend Equivalent Credit” has the meaning given it in Section 7(b).

(m)“Election Form” means the Election Form attached as Exhibit B hereto or such other form as may be deemed acceptable by the Secretary of the Company from time to time.

(n)“Eligible Director” means each member of the Board who is not at the time of reference an employee of the Company or any of its subsidiaries.

(o)“Exchange Act” means the Securities Exchange Act of 1934, as amended.

(p)“Fair Market Value” as of any date means, the fair market value as defined under the Stock Plan.

(q)“Meeting Fees” means the amounts payable to an Eligible Director in arrears on any Quarterly Payment Date for attendance at meetings or participation in teleconferences of the Board or any committee of the Board (exclusive of any Basic Fee, Chairperson Fee or Non-Executive Chairman Fee).

(r)“Non-Executive Chairman Fee” means the annual retainer payable to the Eligible Director who is selected to be the Non-Executive Chairman at the annual rate in effect on the Accounting Date for such Eligible Director's services as the Non-Executive Chairman.

(s)“Program” means the Company's Directors Compensation Program, as amended from time to time.

(t)“Proration Fraction” means a fraction, the numerator of which is the number of days from the date an Eligible Director first becomes an Eligible Director to the date of the next succeeding annual meeting of stockholders and the denominator of which is 365.

(u)“Quarterly Payment Date” means the date established by the Company from time to time for payment, in arrears, of all Meeting Fees earned by Eligible Directors during the preceding calendar quarter, provided such date shall not be later than the fifteenth day of the third month following the end of such calendar quarter.

(v)“Restricted Stock Unit” means a right to receive payment of one share of Common Stock in accordance with the conditions set forth in Section 7 hereof or conditions established by the Committee.

(w)“Rule 16b-3” means Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to time.

(x)“Separation from Service” means the individual has ceased to be a member of the Board and has ceased to provide services as an independent contractor (including as a member of any board of directors) of the Company and all Affiliates, or such other change in status that constitutes a “separation from service” under Code section 409A.

(x)“Stock Plan” means the then current stock incentive plan of the Company used to grant stock based awards to Eligible Directors.

SECTION 3. ADMINISTRATION

(a)The Program shall be administered by the Committee.

(b)In administering the Program, it will be necessary to follow various laws and regulations. It may be necessary from time to time to change or waive requirements of the Program to conform with the law, to meet special circumstances not anticipated or covered in the Program, or to carry on successful operation of the Program, and in connection therewith, the Committee shall have the full power and authority to:

(i)Prescribe, amend, and rescind rules and regulations relating to the Program, establish procedures deemed appropriate for its administration, interpret the provisions of the Program, remedy ambiguities, and make any and all other determinations not herein specifically authorized which may be necessary or advisable for its effective administration;

(ii)Make any amendments to or modifications of the Program which may be required or necessary to make the Program set forth herein comply with the provisions of any laws, federal or state, or any regulations issued thereunder, and to cause the Company at its expense to take any action related to the Program which may be required under such laws or regulations;

(iii)Contest on behalf of the Eligible Directors or the Company, at the sole discretion of the Committee and at the expense of the Company, any ruling or decision on any issue related to the Program, and conduct any such contest and any resulting litigation to a final determination, ruling, or decision; and

(iv)Grant stock-based awards under the Program, as provided in Section 5 hereof.

(c)Unless otherwise expressly provided in the Program, all designations, determinations, interpretations and other decisions under or with respect to the Program or any award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Eligible Director or beneficiary, and any employee of the Company.

SECTION 4. FEES/EXPENSES

(a)Each Eligible Director who is first elected to the Board at, or who continues to serve on the Board immediately following an annual meeting of stockholders, is entitled to receive a Basic Fee and a Chairperson Fee for serving as chairperson of a committee of the Board (as applicable).

(b)Any Eligible Director who is designated as the Non-Executive Chairman is entitled to

receive a Non-Executive Chairman Fee for services as the Non-Executive Chairman.

(c)Each Eligible Director who joins the Board or becomes a chairperson of a committee of the Board or Non-Executive Chairman after the annual meeting of stockholders is entitled to receive a Basic Fee, Chairperson Fee or Non-Executive Chairman Fee (as applicable) multiplied by the Proration Fraction, as of the date such Eligible Director first becomes an Eligible Director, chairperson of a committee of the Board or Non-Executive Chairman.

(d)Each Eligible Director is entitled to receive a Meeting Fee for attendance at a meeting of the Board or a Committee of the Board or participation in a teleconference in lieu of such meeting. The Meeting Fees are payable in arrears on the Quarterly Payment Date. Any member of the Board who interviews a Board candidate shall be entitled to receive compensation in an amount equal to the Meeting Fee for an in person Board meeting for each such interview.

(e)The current rate of the Basic Fee, Chairperson Fee, Non-Executive Chairman Fee and Meeting Fees are set forth on the attached Exhibit A, and may be amended from time to time by the Board or any committee given responsibility for determining Board of Director compensation.

(f)Each Eligible Director is entitled to reimbursement for reasonable travel costs of attending Board and committee meetings and interviews of Board candidates. Such reimbursement shall be payable in cash after receipt of documentation by the Company from such Eligible Director, provided reimbursement is made no later than the end of the calendar year following the calendar year in which the expense was incurred.

SECTION 5. ANNUAL GRANT OF STOCK BASED AWARD

(a)Each Eligible Director who is first elected to the Board at, continues to serve on the Board or is serving as the Non-Executive Chairman of the Board immediately following an annual meeting of stockholders shall be granted a stock based award (i.e., options, restricted stock, etc.) as of the date of such meeting in type, proportion and amount to be determined by the Committee and under, and in accordance with, the terms of the Stock Plan.

(b)Each Eligible Director who joins the Board after an annual meeting of stockholders, shall be granted a stock based award pursuant to this Section 5 as of the date such Eligible Director first becomes an Eligible Director based on the dollar value of the grant made at the time of the immediately preceding annual meeting of stockholders (“Grant”), multiplied by the Proration Fraction and allocated in the same manner as the Grant. An Eligible Director who is appointed the Non-Executive Chairman of the Board after an annual meeting of stockholders, shall be granted a stock based award pursuant to this Section 5 as of the date such Eligible Director first becomes the Non-Executive Chairman of the Board based on dollar value of the grant made at the time of the immediately preceding annual meeting of stockholders (Non-Executive Grant”), multiplied by the Proration Fraction and allocated in the same manner as the Non-Executive Grant.

(c)Terms and conditions of stock based awards (such as grant price, vesting schedule, etc.) shall be as determined by the Committee and under, and in accordance with, the terms of the Stock Plan.

(d)The amount and composition of the current annual stock based award are set forth on the attached Exhibit A, which may be amended from time to time by the Board or any committee given responsibility for determining Board of Director compensation.

SECTION 6. MATCHING GIFT PROGRAM

Each Eligible Director is entitled to a matching gift from the Company of up to $15,000 per calendar year to qualifying charitable institutions, prorated for any calendar year that Eligible Director joins the Board. Each Eligible Director must submit evidence of such gift to the Company and the Company will send the matching contribution directly to the qualifying charitable institution on behalf of the Eligible Director.

SECTION 7. ELECTIONS TO RECEIVE COMMON STOCK OR RESTRICTED STOCK UNITS

(a)Elections.

(i)Common Stock. Each Eligible Director who is not covered by clause (iii) below, may elect to receive, in lieu of a cash payment for his or her Basic Fee, Chairperson Fee, Non-Executive Chairman Fee and/or Meeting Fees (or a portion thereof, as elected by the Eligible Director), a number of shares of Common Stock (excluding fractional shares, which shall be paid in cash (or carried over to the next payment if an Eligible Director elects to be paid all in Common Stock)), which is calculated by dividing his or her Basic Fee, Chairperson Fee, Non-Executive Chairman Fee and/or Meeting Fees (or a portion thereof), by the Fair Market Value of one share of Common Stock on the Accounting Date or Quarterly Payment Date, as applicable. To be effective, any such election shall be made by submitting a completed and executed Election Form to the Secretary of the Company prior to the relevant Accounting Date or Quarterly Payment Date, as applicable.

(ii)Restricted Stock Units. Each Eligible Director who is not covered by clause (iii) below, may elect to receive, in lieu of cash payment for his or her Basic Fee, Chairperson Fee, Non-Executive Chairman Fee and/or Meeting Fees, Restricted Stock Units (including fractional Restricted Stock Units) calculated by dividing his or her Basic Fee, Chairperson Fee, Non-Executive Chairman Fee and/or Meeting Fees (or a portion thereof, as elected by the Eligible Director) for services to be performed in the following the calendar year by the Fair Market Value of one share of Common Stock on the Accounting Date or Quarterly Payment Date, as applicable. To be effective, any such election relating to the Basic Fee, Chairperson Fee, Non-Executive Chairman Fee or Meeting Fees shall be made by submitting a completed and executed Election Form to the Secretary of the Company prior to the calendar year in which the Eligible Director wishes the election to be in effect and such election shall be irrevocable for such calendar year.

(iii)New Directors. Each Eligible Director who during the preceding twenty-four (24) months has not participated in any deferred compensation arrangement of the Company or any Affiliate that would be treated as a single plan with this Plan under Treas. Reg. Sec. 1.409A-1(c)(2)(i) and who joins the Board between annual meetings of stockholders may elect prior to first becoming an Eligible Director to receive, in lieu of cash payment for his or her Basic Fee, Chairperson Fee and/or Non-Executive Chairman Fee, a number of shares of Common Stock (excluding fractional shares, which shall be paid in cash (or carried over to the next payment if an Eligible Director elects to be paid all in Common Stock)) and/or Restricted Stock Units (including fractional Restricted Stock Units) up to the number which is calculated by (A) multiplying the sum of his or her Basic Fee, Chairperson Fee, Non-Executive Chairman Fee (or a portion thereof, as elected by the Eligible Director) payable with respect to the time prior to the next annual meeting of stockholders which the Eligible Director is first elected to the Board by the Proration Fraction and (B) dividing the product resulting from clause (A) by the Fair Market Value of one share of Common Stock on the date that the Eligible Director becomes an Eligible Director. Each Eligible Director may also elect to receive, in lieu of cash payment for his or her Meeting Fees (or a

portion thereof, as elected by the Eligible Director), Common Stock (excluding fractional shares, which shall be paid in cash (or carried over to the next payment if an Eligible Director elects to be paid all in Common Stock)) Restricted Stock Units (including fractional Restricted Stock Units) calculated by dividing his or her Meeting Fees (or portion thereof) by the Fair Market Value of one share of Common Stock on the Quarterly Payment Date. To be effective, any such election shall be made by submitting a completed and executed Election Form to the Secretary of the Company prior to the date that the Eligible Director becomes a Director, and such Election Form shall be irrevocable on the date he or she first becomes an Eligible Director for that calendar year with respect to any election (or lack of election) to receive Restricted Stock Units.

(b)Restricted Stock Units.

(i)Account. Upon the grant of Restricted Stock Units to an Eligible Director, such units shall be credited to an account established for such Eligible Director. A Restricted Stock Unit shall be treated as granted on the corresponding Accounting Date or last day of the calendar quarter relating to the fees for which the Restricted Stock Units are determined. Each Eligible Director shall receive an annual statement showing the number of Restricted Stock Units that have been credited to the Eligible Director's account under the Program.

(ii) Dividend Equivalent Credits. An Eligible Director's account shall be credited with Dividend Equivalent Credits equivalent to the amount of dividends paid by the Company to holders of outstanding shares of Common Stock based on the number of Restricted Stock Units credited to the Eligible Director's account on the dividend record date for shares of Common Stock. Such Dividend Equivalent Credit shall be converted into an equivalent number of Restricted Stock Units (including fractional Restricted Stock Units) based on the fair market value of one share of Common Stock on the related dividend payment date and such Restricted Stock Units shall be subject to the same distribution timing as the underlying Restricted Stock Units to which the Dividend Equivalent Credits related. If a dividend is paid in cash, each Eligible Director shall be credited, as of each applicable dividend payment date, in accordance with the following formula:

(A X B) / C

in which “A” equals the number of Restricted Stock Units held by the Eligible Director on the dividend record date, “B” equals the cash dividend per share and “C” equals the Fair Market Value per share of Common Stock on the dividend payment date. If a dividend is paid in property other than cash, Dividend Equivalent Credits shall be credited, as of the applicable dividend payment date, in accordance with the formula set forth above, except that “B” shall equal the fair market value per share of the property that the Eligible Director would have received in respect of the number of shares of Common Stock equal to the number of Restricted Stock Units held by the Eligible Director as of the dividend record date, had such shares been owned by the Eligible Director as of the record date for such dividend.

(iii)Time of Payment. All payments in respect of an Eligible Director's Restricted Stock Units shall be made as soon as practicable but not more than ninety (90) days following the earlier of (A) the Eligible Director's death (B) the occurrence of a Change in Control, and (C) the specific date (including upon the Eligible Director's Separation from Service) the Eligible Director has elected to receive payment pursuant to the applicable Election Form pursuant to which such Eligible Director elected to receive such Restricted Stock Units in lieu of cash. If distribution is to be made upon a Separation from Service and the individual is a “specified employee,” as defined under Code section 409A, on the date of such Separation from Service, then no distribution will be

made before the date that is six (6) months after the date of the individual's Separation from Services, or if earlier, upon his or her death.

(iv)Form of Payment. Payment in respect of Restricted Stock Units shall be made in one lump sum payment in the form of shares of Common Stock. For purposes of the preceding sentence, any payment made upon the occurrence of a Change in Control in full or partial payment of Restricted Stock Units shall be made in cash in an amount equal the Change in Control Price multiplied by the number of Restricted Stock Units (including fractional units).

(c)Stock Plan.

All shares of Common Stock and all Restricted Stock Units awarded pursuant to this Section 7 shall be awarded under, and in accordance with, the terms of the Stock Plan. Restricted Stock Units awarded hereunder shall be considered Other Stock-Based Awards under the Plan.

SECTION 8. CHANGE IN CONTROL

(a)For purposes of this Section 8, “Act” shall mean the Securities Exchange Act of 1934.

(b)For purposes of the Program, a “Change in Control” of the Company shall be deemed to have occurred if any one of the following events shall occur:

(i)the consummation of a transaction or series of related transactions during a 12-month period in which a person, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Act) that owns (after application of the attribution rules of Section 318 of the Code) less than 35% of the combined voting power of the Company's outstanding voting stock prior to such transaction or the first of such series of related transactions), other than the Company or a subsidiary of the Company, or any employee benefit plan of the Company or a subsidiary of the Company, acquires ownership (after application of the attribution rules of Section 318 of the Code) of 35% or more of the combined voting power of the Company's then outstanding voting stock (other than in connection with a Business Combination in which clauses (1) and (2) of Section 8(b) (iii) apply); or

(ii)a majority of the members of the Company's Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company's Board of Directors prior to the date of the election or appointment; or

(iii)the consummation of a reorganization, merger, statutory share exchange, consolidation or similar transaction involving the Company, a sale or other disposition in a transaction or series of related transactions within a 12-month period of all or substantially all of the Company's assets or the issuance by the Company of its stock in connection with the acquisition of assets or stock of another entity (each, a “Business Combination”) in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the owners of the Company's outstanding voting stock immediately prior to such Business Combination own (after application of the attribution rules of Section 318 of the Code) immediately after the transaction or transactions more than 50% of the combined voting power of the then outstanding voting stock (or comparable equity interests) of the entity resulting from such Business Combination (including an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one of more

subsidiaries), and (2) no person, entity or group (other than a direct or indirect parent entity of the Company that, after giving effect to the Business Combination, beneficially owns 100% of the outstanding voting securities (or comparable equity interests) of the entity resulting from the Business Combination) has acquired, during a 12-month period, ownership (after application of the attribution rules of Section 318 of the Code) of 35% or more of the combined voting power of the then outstanding voting stock (or comparable equity interests) of the entity resulting from such Business Combination.

Notwithstanding anything herein stated, no Change in Control shall be deemed to occur unless such event constitutes a change in ownership or effective control, or a change in the ownership of a substantial portion of the assets, of a business under Code section 409A.

SECTION 9. AMENDMENT; TERMINATION

The Board may at any time and from time to time alter, amend, suspend, or terminate the Program in whole or in part; provided, however, that no amendment which requires stockholder approval in order for the exemptions available under Rule 16b-3 to be applicable to the Program and the Eligible Directors shall be effective unless the same shall be approved by the stockholders of the Company entitled to vote thereon.

SECTION 10. RIGHTS OF ELIGIBLE DIRECTORS

Nothing contained in the Program or with respect to any grant shall interfere with or limit in any way the right of the stockholders of the Company to remove any Eligible Director from the Board pursuant to the bylaws of the Company, nor confer upon any Eligible Director any right to continue in the service of the Company as a director.

SECTION 11. GENERAL RESTRICTIONS

(a)Investment Representations. The Company may require any Eligible Director to whom Common Stock is issued, as a condition of receiving such Common Stock, to give written assurances in substance and form satisfactory to the Company and its counsel to the effect that such person is acquiring the Common Stock for his or her own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws.

(b)Compliance with Securities Laws. Each issuance shall be subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration or qualification of the shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance of shares thereunder, such issuance may not be accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Committee. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification.

(c)Nontransferability. Except as otherwise provided by the Committee, Restricted Stock Units under this Program shall not be transferable by an Eligible Director other than by the laws of descent and distribution.

(d)No Acceleration of Distribution of Restricted Stock Units. The distribution of Restricted Stock Units may not be accelerated, including upon termination of the Program, if such acceleration

would cause the distribution to become subject to tax under Code Section 409A.

SECTION 12. WITHHOLDING

The Company may defer making payments or delivering shares of Common Stock under the Program for up to 30 days to ensure that satisfactory arrangements have been made for the payment of any federal, state or local income or employment taxes that the Company reasonably determines in its sole discretion are required to be withheld with respect to such payment or delivery.

SECTION 13. GOVERNING LAW

The Program and all rights hereunder shall be construed in accordance with and governed by the internal law, and not the law of conflicts, of the State of Delaware.

SECTION 14. UNFUNDED PROGRAM

The Program shall be unfunded and shall not create (or be construed to create) a trust or a separate fund or funds. The Program shall not establish any fiduciary relationship between the Company and any Eligible Director or other person. To the extent any person holds any rights by virtue of a grant under the Program, such right shall be no greater than the right of an unsecured general creditor of the Company.

SECTION 15. HEADINGS

The headings of sections and subsections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of the Program.

EXHIBIT A

FEES

(as of May 4, 2011)

Basic Fee	$50,000
Non-Executive Chairman	$ 87,500, in addition to the Basic Fee for service as a member of the Board of Directors.
Committee Chair	Audit & Finance: $10,000 Compensation: $10,000 Nominating & Governance: $7,500
Board Meetings/Teleconferences	$ 1,500/$1,000
Audit & Finance Meetings/Teleconferences	$ 1,500/$1,000
Compensation Committee Meetings/Teleconferences	$ 1,500/$1,000
Nomination & Governance Meetings/Teleconferences	$ 1,500/$1,000
Annual Stock Based Grants	All Eligible Directors: Dollar value $175,000 in options and restricted stock, with 50% as options and 50% as restricted stock (calculated using modified Black-Scholes model) Non-Executive Chairman: $87,500 in options and restricted stock, with the same division as between options and restricted stock, in addition to the Annual Stock Based Grant for service as a member of the Board of Directors

EXHIBIT B

IMATION CORP.

DIRECTORS COMPENSATION PROGRAM

ELECTION FORM

THIS ELECTION is made by _________ (the “Eligible Director”), effective as of the ___ day of ___, 200_.

WHEREAS, Imation Corp., a Delaware corporation (the “Company”) has a director compensation program (the “Program”);

WHEREAS, the Eligible Director has the option under the Program to receive Common Stock and/or Restricted Stock Units in lieu of payment of certain cash compensation for service as a director of the Company;

NOW, THEREFORE, in accordance with the terms and conditions of the Program, the Eligible Director hereby agrees as follows:

The Program

This Election is entered into pursuant to the Program, which is incorporated herein by reference and made a part hereof. The Eligible Director hereby acknowledges receipt of a copy of the Program. All capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Program.

Basic Fee, Chairperson Fee and Non-Executive Chairman Fee (“Annual Grant”)

The Basic Fee, Chairperson Fee and Lee Director Fee is payable (and prorated) on the date first elected to the Board of Directors (if other than at an annual meeting of stockholders). Thereafter, the Basic Fee, Chairperson Fee and Non-Executive Chairman Fee is payable on each Accounting Date following the Annual Meeting of Stockholders.

** Special Tax Rules Relating to Election to Receive Restricted Stock Units

Due to Internal Revenue Code Section 409A relating to the taxation of deferred compensation, an election to receive Restricted Stock Units under the Program can only be made for services performed and payments to be received following the calendar year in which the election is made (e.g., an election made in 2007 is not effective until January 1, 2008). Also, the election must remain in effect for the ENTIRE calendar year. Any change in or termination of the election can only be made the year before it is to go in effect (e.g., a change for 2008 must be made before the end of 2007.)

Subject to the terms and conditions of the Program, the Eligible Director hereby elects to receive the Basic Fee, the Chairperson and Non-Executive Chairman Fee, if applicable, in the following manner:

BASIC FEE

___ % Election to receive Common Stock in lieu of Cash

___ % Election to receive Restricted Stock Units in lieu of Cash**

___ % Election to receive Cash

Total:100 %

CHAIRPERSON FEE: (if applicable)

___ % Election to receive Common Stock in lieu of Cash

___ % Election to receive Restricted Stock Units in lieu of Cash**

___ % Election to receive Cash

Total:100 %

MEETING FEES:

Subject to the terms and conditions of the Program, the Eligible Director elects to receive Meeting Fees compensation in the following manner, with such fees payable on each Quarterly Payment Date:

___ % Election to receive Common Stock in lieu of Cash

___ % Election to receive Restricted Stock Units in lieu of Cash**

___ % Election to receive Cash

Total:100 %

NON-EXECUTIVE CHAIRMAN FEE: (if applicable)

___ % Election to receive Common Stock in lieu of Cash

___ % Election to receive Restricted Stock Units in lieu of Cash**

___ % Election to receive Cash

Total:100 %

DISTRIBUTION ELECTION FOR RESTRICTED STOCK UNITS: (Must be completed if Eligible Director has made an Election to Receive Restricted Stock Units.)

The Eligible Director hereby elects to receive payment of his or her Restricted Stock Units on the earlier to occur of a Change in Control, his or her death or the following date:

______-year anniversary of the grant date (please specify)

___The date the Eligible Director incurs a “separation from service” with Company (within the meaning of Section 409A of the Internal Revenue Code).

___Other (please specify date only): ___________________________

Term of Election

This Election will remain in effect until terminated or changed by the Eligible Director pursuant to written notice to the Secretary of the Company or filing of a new Election Form. Note: A change or termination of an Election to receive Restricted Stock Units will not become effective until January 1 of the calendar year following the calendar year the change or termination is filed with the Secretary of the Company.

IN WITNESS WHEREOF, the Eligible Director has entered into this Election on the day and year first above written, and the Company has accepted this Election as of such day and year.

ELIGIBLE DIRECTOR

Signature

Accepted and Agreed to by IMATION CORP.

By:

Title:

M:

Compensation

Director Compensation Program Document

Compensation Program as Amended FINAL May 2011.doc

EX-10

Exhibit 10.2

AMENDED AND RESTATED

SEVERANCE AGREEMENT

THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this “Agreement”) is made as of the 20th day of June, 2011, between Imation Corp., a Delaware corporation, with its principal offices at One Imation Way, Oakdale, Minnesota 55128 (the “Company”) and John P. Breedlove, 860 Fox Court, Chanhassen, MN 55317.

WHEREAS, this Agreement is intended to specify the financial arrangements that the Company will provide to you upon your separation from employment with the Company and all of its Affiliates under any of the circumstances described herein; and

WHEREAS, this Agreement is entered into by the Company in the belief that it is in the best interests of the Company and its shareholders to help assure that the Company will have your continued dedication during your employment with the Company, by providing for certain severance benefits under certain circumstances in connection with your employment with the Company or any of its Affiliates, thereby enhancing the Company’s ability to attract and retain highly qualified people; and

WHEREAS, this Agreement hereby amends and restates in its entirety any previous Severance Agreement between the Company and you.

NOW THEREFORE, to assure the Company that it will have your continued dedication, and to induce you to remain in the employ of the Company or any of its Affiliates, and for other good and valuable consideration, the Company and you agree as follows:

1.    Term of Agreement. The term of this Agreement shall commence on the date of this Agreement (the “Effective Date”) and shall continue in effect until the first anniversary of the Effective Date, and shall thereafter be automatically renewed for successive one-year terms provided that you are employed by the Company or any of its Affiliates on each anniversary of the Effective Date (the “Covered Period”), unless the Company, upon authorization by its Board of Directors gives notice to you that the Company does not wish to extend this Agreement, and provided further, that, notwithstanding any such notice by the Company not to extend, the Covered Period and this Agreement shall continue in effect for a period of 12 months from the date of the notice in the event the notice is not given following a Change of Control, or for a period of 24 months following the date of a Change of Control in the event the notice is given following such Change of Control.

2.    Definitions. When the following terms are used in this Agreement with initial capital letters, they shall have the following meanings.

(i)    “Affiliate” means any entity that, together with the Company, is treated as a single employer under Code section 414(b) or (c). For purposes of determining whether a Termination of Employment has occurred, the term Affiliate will be determined by applying Code section 1563(a)((1), (2) and (3) for purposes of determining a controlled group of corporations under Code section 414(b) and in applying Treas. Reg. Section 1.414(c)-2 for purposes of determining trades or businesses that are under common control for purposes of Code section 414(c), the phrase “at least 50 percent” will be used instead of “at least 80 percent” each place it appears.

(ii)    “Cause” shall mean termination by the Company or an Affiliate of your

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employment based upon:

(a) your gross incompetence or substantial failure to perform your duties; or

(b) misconduct by you that causes or is likely to cause harm to the Company or an Affiliate or that causes or is likely to cause harm to the Company’s or an Affiliate’s reputation, as determined by the Company’s or Affiliate’s Board of Directors in its sole and absolute discretion (such misconduct may include, without limitation, insobriety at the workplace during working hours or the use of illegal drugs); or

(c) failure to follow directions of the Company’s or Affiliate’s Board of Directors that are consistent with your duties; or

(d) your conviction of, or entry of a pleading of guilty or nolo contendere to, any crime involving moral turpitude, or the entry of an order duly issued by any federal or state regulatory agency having jurisdiction in the matter permanently prohibiting you from participating in the conduct of the affairs of the Company or an Affiliate.

(iii)    “Good Reason” shall mean the occurrence of any of the following events, except for occurrence of such an event in connection with the termination of your employment or reassignment by the Company or an Affiliate for Cause, for disability or for death, provided you have given the Company written notice within ninety (90) days of the initial existence of the Good Reason event and the Company has not cured such event within thirty (30) days of the receipt of such notice:

(a)    a material diminution, either prior to or following a Change of Control, of your authority, duties or responsibilities from your authority, duties or responsibilities as of the date of this Agreement; or

(b)    a material diminution, either prior to or following a Change of Control,in your base compensation (specifically excluding any long-term incentive compensation for which you are eligible), excluding any reduction caused by a restructuring by management of benefits for the employees of the company as a whole that affects you in a manner comparable to other senior executives of the Company; or

(c)    a material change in the geographic location at which you perform your services following a Change of Control (but in no event including a relocation that does not increase the actual distance required for you to commute from your home to the new place of business by more than 10 miles).

(iv)    “Change of Control” means any one of the following events:

(a)    the consummation of a transaction or series of related transactions in which a person, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than the Company or a subsidiary of the Company, or any employee benefit plan of the Company or a subsidiary of the Company, acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the Company’s then outstanding shares of common stock or the combined voting power of the Company’s then outstanding voting securities (other than in connection with a Business Combination in which clauses (1), (2) and (3) of paragraph (iii)(c) apply); or

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(b)    individuals who, as of the Effective Date hereof, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors of the Company; provided, however, that any individual becoming a director subsequent to the Effective Date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than a nomination of an individual whose initial assumption of office is in connection with a solicitation with respect to the election or removal of directors of the Company in opposition to the solicitation by the Board of Directors of the Company) shall be deemed to be a member of the Incumbent Board; or

(c)    the consummation of a reorganization, merger, statutory share exchange, consolidation or similar transaction involving the Company, a sale or other disposition in a transaction or series of related transactions of all or substantially all of the Company’s assets or the issuance by the Company of its stock in connection with the acquisition of assets or stock of another entity (each, a “Business Combination”) in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Company’s outstanding common stock and the Company’s outstanding voting securities immediately prior to such Business Combination beneficially own immediately after the transaction or transactions, directly or indirectly, more than 50% of the then outstanding shares of common stock and more than 50% of the combined voting power of the then outstanding voting securities (or comparable equity interests) of the entity resulting from such Business Combination (including an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one of more subsidiaries) in substantially the same proportions as their ownership of the Company’s common stock and voting securities immediately prior to such Business Combination, (2) no person, entity or group (other than a direct or indirect parent entity of the Company that, after giving effect to the Business Combination, beneficially owns 100% of the outstanding voting securities (or comparable equity interests) of the entity resulting from the Business Combination) beneficially owns, directly or indirectly, 35% or more of the outstanding shares of common stock or the combined voting power of the then outstanding voting securities (or comparable equity interests) of the entity resulting from such Business Combination and (3) at least a majority of the members of the board of directors (or similar governing body) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board of Directors of the Company providing for such Business Combination; or

(d)    approval by the stockholders of the dissolution of the Company.

(v)    “Date of Termination” shall mean the date specified in the Notice of Termination (except in the case of your death, in which case Date of Termination shall be the date of death); provided the Date of Termination is consistent with your Termination of Employment.

(vi)    “Notice of Termination” shall mean a written notice which sets forth the Date of Termination and, in reasonable detail, the facts and circumstances claimed to provide a basis, if any, for your Termination of Employment.

(vii)    “Termination of Employment” means a termination of your employment

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relationship with the Company and all Affiliates or such other change in your relationship with the Company and all Affiliates that would be considered a “separation from service” under Section 409A of the Code. Your employment relationship will be treated as remaining intact while you are on a military leave, a sick leave or other bona fide leave of absence (pursuant to which there is a reasonable expectation that you will return to perform services for the Company or an Affiliate) but only if the period of such leave does not exceed six (6) months, or if longer, so long as you retain a right to reemployment by the Company or an Affiliate under applicable statute or by contract, provided, however, where your leave is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months and such impairment causes you to be unable to perform the duties of your position of employment or any substantially similar position of employment, a twenty-nine (29) month period of absence may be substituted for such six (6) month period of absence. In all cases, the Executive’s Termination of Employment must constitute a “separation from service” under Section 409A of the Code and any “separation under service” under Section 409A of the Code shall be treated as a Termination of Employment.

3.    Termination Procedures. Any purported Termination of Employment by the Company or an Affiliate or you (other than by reason of your death) during the Covered Period shall be communicated by a Notice of Termination in accordance with Section 9 hereof. No purported Termination of Employment by the Company or an Affiliate during the Covered Period shall be effective if it is not pursuant to a Notice of Termination. Failure by you to provide Notice of Termination shall not limit any of your rights under this Agreement except to the extent the Company can demonstrate that it suffered actual damages by reason of such failure.

4.    Qualification for Severance Benefits. You shall be eligible for severance benefits pursuant to the terms of this Agreement on account of your Termination of Employment if the Date of Termination occurs during the Covered Period in either of the following circumstances:

(i)     Termination of Employment by the Company or an Affiliate of your employment with the Company and its Affiliates for any reason other than Cause; or

(ii)    Termination of Employment by you for Good Reason within the twenty-four (24) month period following the initial existence of the Good Reason event and, in the event of a Change in Control, only on or after the 120^th day following the Change in Control;

provided, however, that you shall not begin receiving any payments or benefits under this Agreement unless and until you execute a general release of all claims against the Company and its Affiliates, including non-competition and non-solicitation covenants, in the form attached hereto as Exhibit A and you have not rescinded such release within the permitted time period for rescission under Section 3.J therein; and providedfurther, that in such case, failure to execute such release within 21 days of your Date of Termination shall result in the loss of any rights to receive payments or benefits under this Agreement. No severance benefits become payable pursuant to this Agreement in the event of Termination of Employment upon your death or disability.

5.    Compensation Upon Termination.

(i)    Amounts. Upon qualification for severance benefits pursuant to this Agreement, you shall be entitled to the benefits, to be funded from the general assets of the Company, provided below:

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(a)    The Company shall pay to you (1) the full base salary earned by you and unpaid through the Date of Termination, at the rate in effect on the date of the Notice of Termination, (2) any amount earned by you as a bonus with respect to the fiscal year of the Company immediately preceding the Date of Termination if such bonus has not theretofore been paid to you, and (3) an amount representing credit for any paid time off earned or accrued by you but not taken during the current “paid time off year”;

(b)    In lieu of any further base salary payments to you for periods subsequent to the Date of Termination, the Company shall pay to you:

(I)    If the Date of Termination for a Termination of Employment by the Company other than for Cause, or the event giving rise to Termination of Employment by you for Good Reason, occurs prior to a Change of Control (other than as described in the proviso in clause (II) below) (a “Non-Change-of-Control Termination”), the sum of an amount equal to the target bonus under the applicable annual bonus plan for the fiscal year in which the Date of Termination occurs (specifically excluding any long-term incentive compensation for which you are eligible) plus an amount equal to your annual base salary for the fiscal year in which the Date of Termination occurs (but disregarding any decrease thereof that constituted “Good Reason”); or

(II)    If the Date of Termination for a Termination of Employment by the Company other than for Cause, or the event giving rise to Termination of Employment by you for Good Reason, occurs after a Change of Control (a “Change-of-Control Termination”),:

(A)    if the Date of Termination occurs one year or less after the Change of Control, the sum of (i) an amount equal to two (2) times the average of the sum of the actual annual bonuses paid to you for the two years prior to the fiscal year in which the Date of Termination occurs provided that if you are an employee for more than one year and less than two years prior to the fiscal year in which the termination occurs, such amount will be equal to two (2) times the last year’s actual bonus paid, or if you are employed less than one year, such amount shall be equal to two (2) times the target amount for that year as determined by the Compensation Committee (specifically excluding any long-term incentive compensation for which you are eligible) plus (ii) an amount equal to two (2) times your annual base salary for the fiscal year in which the Date of Termination occurs (but disregarding any decrease thereof that constituted “Good Reason”); or

(B)    if the Date of Termination occurs more than one year, but within two years, after the Change of Control, an amount equal to one (1) times the average of the sum of the actual annual bonuses paid to you for the two years prior to the fiscal year in which the Date of Termination occurs provided that if you are an employee for more than one year and less than two years prior to the fiscal year in which the termination occurs, such amount will be equal to the last year’s actual bonus paid, or if you are employed less than one year, such amount shall be equal to the target amount for that year as determined by the Compensation Committee

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(specifically excluding any long-term incentive compensation for which you are eligible) plus an amount equal to one (1) times your annual base salary for the fiscal year in which the Date of Termination occurs (but disregarding any decrease thereof that constituted “Good Reason”).

(c)    The Company shall provide you a lump sum payment equal to the aggregate amount of the employer portion of COBRA premiums (and excluding any administration fees) that would be incurred for continuation under the Company’s employee group medical and dental Plan based on coverage and COBRA continuation premiums in effect immediately prior to the Date of Termination, (1) equal to twelve (12) months of continuation coverage following the Date of Termination in the case of a Non-Change-of-Control, or (2) equal to twenty-four (24) months of continuation coverage following the Date of Termination in the case of a Change-of-Control Termination that occurs within two years of the Change-of- Control.

(d)    Intentionally deleted.

(ii)    No Disability or Life Insurance Benefits. The Company shall not be required to continue to provide disability or life insurance benefits (group or individual) following your Date of Termination other than with respect to benefits to which you became entitled prior to the Date of Termination and which are required to be paid following such Date of Termination in accordance with the terms of applicable disability or life insurance plans or policies in effect prior to such Date of Termination.

(iii)    Time and Form of Cash Payments.

(a)    In the case of a Non-Change-of-Control Termination, the cash payments provided for in Section 5(i) above shall be paid by the Company in a single lump sum payment as promptly as practicable after the Date of Termination (but not later than the earlier of 90 days after the Date of Termination or March 15 of the calendar year following the calendar in which the Date of Termination occurred, in either case subject to the provisions of Section 4 of this Agreement relating to execution of a release in the form of Exhibit A and provided you have not rescinded such release within the permitted time period for rescission under Section 3.J thereof). All severance payments are subject to any required withholding.

(b)    In the case of a Change-of-Control Termination, the cash payments provided for in Section 5(i) above shall be paid by the Company in a single lump sum payment as promptly as practicable after the Date of Termination (but no later than the earlier of 90 days after the Date of Termination or March 15 of the calendar year following the calendar year in which the Date of Termination occurred, in either case subject to the provisions of Section 4 of this Agreement relating to execution of a release in the Form of Exhibit A and provided you have not rescinded such release within the permitted time period for rescission under Section 3.J thereof). All severance payments are subject to any required withholding.

(iv)    Effect of Reemployment. If you are re-employed by the Company or an Affiliate after severance payments have been scheduled to be made but before the final severance payment is made, all remaining severance payments shall be forfeited and shall automatically terminate as of the date of re-employment. If you have received severance payments in a single lump sum and

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are re-employed before the date the final severance payment would have been made if payments had been made at regular payroll intervals in an amount equal to your base salary that you were receiving before your Termination of Employment (plus an amount equal to the pro rata portion of your target bonus), you will be required to refund to the Company: (a) that portion of the lump sum payment representing severance payments you would have received after the date of re-employment minus (b) an amount equal to any taxes paid or payable on such portion of the lump sum payment.

(i)No Mitigation. You shall not be required to mitigate the amount of any payment provided for in this Section 5 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 5 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise, except as set forth in Section 5(iv) hereof.

(vi)    Six Month Suspension for Specified Key Employees. Notwithstanding the foregoing, if at the time of your Termination of Employment you are a Specified Employee, then any payment that the Company reasonably determines is deferred compensation subject to the requirements of Section 409A of the Code and that is payable on account of your Termination of Employmentshall not be paid to you until the first day after the end of the six (6) month period following your Termination of Employment, or, if earlier, upon your death. You are a “Specified Employee” if on the date of your Termination of Employment you are a “key employee” (defined below), and the Company or any entity that owns 50% or more of the Company has stock that is publicly traded on an established securities market within the meaning of such term under Section 409A(a)(2)(B) of the Code. For this purpose, you are a “key employee” during the 12-month period beginning on the April 1 immediately following a calendar year, if at any time during such preceding calendar year you were employed by the Company or any Affiliate and satisfied the requirements of Section 416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with the regulations issued thereunder and disregarding Section 416(i)(5) of the Code). You will not be treated as a Specified Employee if you are not required to be treated as a Specified Employee under Treasury Regulations issued under Section 409A of the Code.

6.    280G Provision.

(i)    In the event that any payment or benefit received or to be received by you (whether payable pursuant to the terms of this Agreement or otherwise (collectively, the “Total Payments”)) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (“Excise Tax”), then you shall be entitled to receive from the Company an additional cash payment (a “Gross-Up Payment”) within thirty business days of such determination in an amount such that after payment by you of all taxes, including any Excise Tax, imposed upon the Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments. Notwithstanding the foregoing provisions of this Section 6(i), if it shall be determined that you are entitled to the Gross-Up Payment, but that the Parachute Value of all Payments do not exceed 110 % of the Safe Harbor Amount, then no Gross-Up Payment shall be made to you and the amounts payable under this Agreement shall be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the payments under Section 5(i)(b). For purposes of reducing the Payments to the Safe Harbor Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. If the reduction of the amount payable under this Agreement would not result in a reduction of the Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable under the

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Agreement shall be reduced pursuant to this Section 6(a). All determinations required to be made under this Section 6, including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by an independent accounting firm retained by the Company (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and you within a reasonable period of time as requested by the Company. If the Accounting Firm determines that no Excise Tax is payable by you, it shall furnish you with an opinion that you have substantial authority not to report any Excise Tax on your federal income tax return. For purposes of this Agreement, the following terms have the meanings set forth below:

“Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

“Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for your benefit, whether paid or payable pursuant to this Agreement or otherwise.

“Safe Harbor Amount” means 2.99 times your “base amount,” within the meaning of Section 280G(b)(3) of the Code.

“Value” of a Payment shall mean the economic present value of a Payment as of the date of the change of control for purposes of Section 280G of the Code, as determined by the Accounting, Firm using the discount rate required by Section 280G(d)(4) of the Code.

(ii)    Any uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder shall be resolved in favor of you. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that at a later time there will be a determination that the Gross-Up Payments made by the Company were less than the Gross-Up Payments that should have been made by the Company (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that you are required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment, if any, that has occurred and any such Underpayment shall be promptly paid by the Company to you or for your benefit. If, after you receive any Gross-Up Payment, you become entitled to receive any refund with respect to such claim, you shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto).

(iii)    Any determination by the Accounting Firm as to the amount of any Gross-Up Payment, including the amount of any Underpayment, shall be binding upon the Company and you.

(iv)    Notwithstanding any other provision of this Section 6, the Company may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for your benefit, all or any portion of any Gross-Up Payment, and you hereby consent to such withholding.

(v)    Notwithstanding the foregoing, reimbursement of the Gross-Up Payment will be made not later than the end of the calendar year next following the calendar year in which you

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remit the related taxes (or the related taxes are remitted on your behalf) to the appropriate taxing authority, provided if an additional Gross-Up Payment is payable following an audit or litigation and no additional taxes are remitted by you, reimbursement by the Company shall be made by the end of the calendar year next following the calendar year in which the audit is completed or there is a final nonappealable settlement or other resolution of the litigation.

7.    Section 409A of the Code. The parties intend that payments under this Agreement be exempt from or otherwise comply with the requirements of Section 409A of the Code (including current and future guidance issued by the Department of Treasury or Internal Revenue Service).

8.    Successors.

(i)    This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(ii)    This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement, to your devisee, legatee or other designee or, if there is no such designee, to your estate or, if no estate, in accordance with applicable law.

(iii)    The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), by agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Company” shall mean the Company and any successor to its business and/or assets which executes and delivers the agreement provided for in this Section 8 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

9.    Notice. All notices, requests, demands and all other communications required or permitted by either party to the other party by this Agreement (including, without limitation, any Notice of Termination) shall be in writing and shall be deemed to have been duly given when delivered personally or received by certified or registered mail, return receipt requested, postage prepaid, at the address of the other party as follows:

If to the Company:        Imation Corp.

Attention: General Counsel

One Imation Way

Oakdale, Minnesota 55128

If to you:            John Breedlove

860 Fox Court

Chanhassen, MN

`                55317

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Either party to this Agreement may change its address for purposes of this Section 9 by giving fifteen (15) days’ prior written notice to the other party hereto.

10.    Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and the Company. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of Minnesota without regard to its conflicts of law principles.

11.    Effect of Agreement; Entire Agreement. This agreement supersedes any and all other oral or written agreements or policies made relating to the subject matter hereof and constitutes the entire agreement of the parties relating to the subject matter hereof.

12.    Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

13.    Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

14.    Employment. This Agreement does not constitute a contract of employment or impose on the Company or any subsidiaries of the Company any obligation to retain you as an employee, to continue your current employment status or to change any employment policies of the Company or any subsidiary of the Company, including but not limited to the Company’s Employee Agreement.

If this letter sets forth our agreement on the subject matter hereof, please sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject.

IMATION CORP.:

By:/s/ Mark Lucas

Name: Mark Lucas

Its: CEO and President

EXECUTIVE:

/s/ John Breedlove

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EXHIBIT A

CONFIDENTIAL GENERAL RELEASE OF ALL CLAIMS

This Confidential General Release of All Claims ("Agreement") is made and entered into between _________________________, ("Employee") and Imation Corp. ("Imation"). EMPLOYEE UNDERSTANDS THAT EMPLOYEE MAY CONSIDER THIS AGREEMENT FOR AT LEAST TWENTY-ONE (21) DAYS AFTER EMPLOYEE HAS RECEIVED THIS AGREEMENT, WHICH WAS ON , UNLESS EMPLOYEE CHOOSES TO WAIVE THAT RIGHT BY EXECUTING THE AGREEMENT WITHIN THE TWENTY-ONE (21) DAY PERIOD.

1.    What Imation Agrees To Do

In return for this Agreement and for Employee's termination from Imation as described herein and in full and final settlement, compromise, and release of all of Employee's employment-related claims (as described in section 2 below), Imation agrees to pay Employee in accordance with the terms set forth in the Amended and Restated Severance Agreement.

2.    What Employee Agrees To Do

As a condition to receiving the payments and benefits set forth in Section 1, Employee agrees as follows:

A)    Employee must return all Imation property currently in Employee's possession, including, but not limited to, all notes, memoranda, correspondence, files, notebooks, technical charts or diagrams, customer lists or information, sales and marketing information, computer recorded information, software, equipment, materials, keys and credit cards. Employee acknowledges that this obligation is continuing and agrees to promptly return to Imation any subsequently discovered property as described above.

B)    Employee also agrees to repay to Imation the amount of any permanent or temporary advances or other monies due and owing Imation, and to pay off the remaining balance on his/her corporate credit cards. If Employee fails to make such payments as of the date he/she signs this Agreement, Employee agrees that Imation may deduct any monies owed from the Agreement payments, if no other written arrangements are made for repayment by the date this Agreement is signed.

C)    Employee hereby irrevocably and unconditionally releases and forever discharges Imation from any and all federal, state or local charges, claims, controversies, causes of action, damages, costs, attorneys' fees, or liabilities of any nature, both past and present, known and unknown, including but not limited to claims arising under federal, state, local, and common laws and under any regulations of any jurisdiction that in any way relate to employment and termination of employment existing at any time up to and including the date of this Agreement, that Employee now may have or ever have had. This Agreement specifically includes, but is not limited to, ANY CLAIMS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT of 1967, THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, any state or local human rights act, claims for wrongful termination, breach of contract, and tort claims (for example, defamation, emotional distress or any tort or negligence-based claim). Employee expressly acknowledges that this Agreement also is intended to include in its scope, without limitation, all claims that Employee does not know of or expect to exist in Employee's favor at the time Employee signs this Agreement and that this Agreement contemplates the extinguishment of any such claim or claims that in any way relate to employment or termination of employment except as expressly provided in this Section. THE

Exhibit A-#PageNum#

EMPLOYEE IS NOT WAIVING ANY RIGHTS FOR EVENTS ARISING AFTER THE DATE OF THIS AGREEMENT.

D)     Employee agrees that, for a period of two years after termination of employment with Imation:

i    Employee will inform any new employer, prior to accepting employment, of the existence of this provision of the Confidential General Release and provide such employer with a copy thereof.

ii.    Employee agrees not to directly or indirectly, render services to any Conflicting Organization in the United States or in any country in which Imation has a plant for manufacturing a product upon which Employee worked during employment by Imation, except that Employee may accept employment with a large Conflicting Organization whose business is diversified (and which has separate and distinct divisions), and which as to part of its business is not a Conflicting Organization, provided Imation, prior to Employee accepting such employment, shall receive separate written assurances satisfactory to Imation from such Conflicting Organization and from Employee that Employee will not render services directly or indirectly in connection with the development, manufacture, marketing, sale, merchandising, leasing, servicing or promotion of any Conflicting Product.

"Conflicting Product" means any product, process, system or service of any person or organization other than Imation, in existence or under development, which is the same as or similar to or competes with, or has a usage allied to, a product, process, system or service upon which Employee worked during the last three years of Employee's employment by Imation.

"Conflicting Organization" means any person or organization which is engaged in or about to become engaged in, research on or development, production, marketing, leasing, selling or services of a Conflicting Product.

E)    Employee also agrees that following Employee's termination from Imation, Employee will not make disparaging remarks about Imation and will not interfere with Imation's business relationships with its customers, vendors, or distributors.

F)    Employee further agrees that Employee will not solicit Imation employees, either on behalf of Employee or any third party, to resign from Imation to work for Employee or any third party.

G)    As further consideration for this Agreement, Employee agrees that if requested by Imation, Employee will make himself/herself available at reasonable times to assist and cooperate with Imation in the litigation of any lawsuits or claims, and agrees to be available to Imation to testify honestly with regard to such lawsuits or claims if Employee is determined by Imation to be a material witness. Similarly, Employee agrees that he/she will decline to voluntarily aid, assist, or cooperate with any parties who are involved in claims or lawsuits by or against Imation, or with their attorneys or agents; and will notify Imation when and if the Employee is contacted by other parties or their attorneys or agents involving claims or lawsuits by or against Imation. It is understood and intended that nothing in this paragraph shall prevent Employee from honestly testifying at a legal proceeding in response to a lawful and properly served subpoena in a proceeding involving Imation.

Exhibit A-#PageNum#

H)    Employee agrees that Imation shall be entitled to injunctive and other equitable relief to prevent a breach or threatened breach of the provisions of this Agreement, without the necessity of proving actual damages. Such injunctive relief shall be in addition to any other damages that may be available at law. Employee also acknowledges that if Imation is required to bring an action to enforce its rights under this Agreement, it shall be entitled to recover its attorney's fees and costs associated with such an action, if Imation prevails.

3.    Other Understandings, Agreements, and Representations

A)    Employee agrees that Employee's Imation employment will terminate effective ____________________. Employee further understands and agrees that Employee will not be eligible for and will not receive consideration, severance pay or benefits under any other group Income Assistance Pay Plan for which Employee might otherwise have been eligible.

B)    Employee understands that the term Imation, as used in this Agreement, includes: (1) its past, present, and future divisions, subsidiaries, affiliates successors and assigns, and their officers, directors, employees, agents, insurers and legal counsel; (2) any ERISA employee benefit plan sponsored by Imation, acting as plan administrator, fiduciary or party in interest with respect to such plan. Employee agrees that this Agreement binds Employee and also binds Employee's heirs, executors, administrators, assigns, agents, partners and successors in interest.

C)    Employee agrees that this Agreement and the payment of money and benefits to Employee by Imation is not an admission by Imation of any violation of Employee's rights or of any statutory or other legal obligation.

D)    Employee represents that no right, claim, or cause of action covered by this Agreement has been assigned or given to someone else.

E)    Employee represents that, except as provided in Section 5(iv) of the Amended and Restated Severance Agreement, Employee will not apply for or accept employment with Imation in any capacity.

F)    Except as set forth in Section 2.D.i Employee represents that Employee will keep the terms of this Agreement strictly confidential, except that Employee may tell Employee's spouse or domestic partner, legal counsel and tax advisor. In the event Employee chooses to communicate any information about the existence of the Agreement or any of its terms to Employee's spouse or domestic partner, legal counsel and/or accountant or investment advisor, Employee shall instruct such persons that information about the existence of the Agreement and its terms are confidential and that the spouse or domestic partner, legal counsel or accountant is not to disclose, disseminate or publicize, or cause or permit to be disclosed, disseminated or publicized, the information to any other party, entity, person (including any current or former employee of Imation), company, government agency, publication judicial authority. Employee may also disclose information regarding the Agreement (1) to the extent necessary to report the sum awarded to appropriate taxing authorities or (2) in response to any subpoena issued by a state or federal governmental agency or court of competent jurisdiction; provided, however, that notice of receipt of such order or subpoena shall be promptly communicated to Imation by telephone and in writing to General Counsel, Imation Legal Affairs, 1 Imation Way, Oakdale, Minnesota 55128, telephone (651) 704-5516 so that Imation shall have an opportunity to intervene and assert what rights it has to nondisclosure prior to any response to such order or subpoena. Any court reviewing a subpoena should be aware that part of the consideration for the Agreement is the agreement of Employee not

Exhibit A-#PageNum#

to testify regarding the existence of the Agreement or any of its terms.

G)    This Agreement and the Amended and Restated Severance Agreement contain the entire understanding between Employee and Imation and supersedes all prior agreements and understandings relating to the subject matter of this Agreement. This Agreement shall not be modified, amended, or terminated except as provided in section 3.J. unless such modification, amendment, or termination is executed in writing by Employee and Imation.

H)    Employee agrees that Imation may use this Agreement to secure withdrawal of any federal, state, or local charge Employee might have filed or will file, that Employee will sign any document necessary to obtain the withdrawal of any such charge, and that Employee waives the right to receive monetary damages or other legal or equitable relief awarded by any governmental agency related to any such charge.

1)    Employee represents and certifies that Employee has twenty-one (21) days to consider whether to accept this Agreement and enter into this Release; review it before being asked to sign it; has read this Agreement carefully; has been given a fair opportunity to discuss and negotiate the terms of this Agreement; understands its provisions; has been advised to consult an attorney; has determined that it is in Employee's best interest to enter into this Agreement; has not been influenced to sign this Agreement by any statement or representation by Imation not contained in this Agreement; and enters into this Agreement knowingly and voluntarily. If Employee chooses to sign this Agreement before twenty-one (21) days have passed, Employee understands that it is their decision to execute the Agreement early and that Imation has made the full twenty-one (21) day period available for Employee to consider the Agreement.

J)    Employee understands that pursuant to the provisions of Minnesota Statutes ' 363.031, subd. 2, Employee may rescind this Agreement by notifying Imation of Employee's desire to do so in a writing delivered to Imation personally or by certified mail, return receipt requested, within fifteen (15) calendar days of Employee's execution of this Agreement. To be effective, such notice of rescission, if mailed, must be postmarked within the fifteen (15) day period and addressed as follows:

Imation Corp.

Attn: General Counsel

1 Imation Way

Oakdale, MN 55128

K)    In case any part of this Agreement is held invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions will not be affected in any way, it being intended that the provisions of this Agreement are severable, EXCEPT THAT, if paragraph 2 of this Agreement is held invalid, illegal, or unenforceable, this Agreement is voidable, and, if Employee seeks to void this Agreement, Employee understands and agrees that Employee will repay the total amount of consideration paid to Employee under this Agreement.

L)    Any dispute arising between Employee and Imation under this Agreement will be submitted to final and binding arbitration in accordance with the rules of the American Arbitration Association before an arbitrator mutually selected by the parties. In the event that the parties cannot agree on an arbitrator, the parties agree to submit the dispute before an arbitrator selected by the Chief Judge of Ramsey County Court. The Arbitration shall be conducted in St. Paul, Minnesota and shall be final and binding on both parties. The expenses of the neutral arbitrator(s) and any court

Exhibit A-#PageNum#

reporter shall be equally divided between Employee and Imation.

Exhibit A-#PageNum#

M)    The agreement will be governed by and construed and interpreted according to the laws of the State of Minnesota.

N)    Nothing in this Agreement shall be deemed to terminate or reduce in any way any right Employee might have to indemnification from Imation under the provisions of the Delaware General Corporation Law and Imation’s Restated Certificate of Incorporation and Bylaws, each as in effect on the date of employment termination, for acts, omissions or events that occurred or are alleged to have occurred prior to the date of termination of employment.

ACCEPTED AND AGREED:            IMATION CORP.

By:    By:

Date:        Date:

WAIVER OF

CONSIDERATION PERIOD

I understand that under the law I have 21 days to consider the Confidential General Release of All Claims. I knowingly and voluntarily waive this consideration period. The 15 day rescission period to revoke the acceptance of the Confidential General Release of All Claims remains in effect.

Print Name

Signature

Date

Exhibit A-#PageNum#

EX-10

Exhibit 10.3

FIRST AMENDMENT

This FIRST AMENDMENT (this “Amendment”), dated as of June 28, 2011, among IMATION CORP., a Delaware corporation (“Imation”), IMATION ENTERPRISES CORP., a Delaware corporation (“Enterprises”) (each of Imation and Enterprises being referred to herein as a “US Borrower” and together as the “US Borrowers”), IMATION EUROPE B.V., a company organized under the laws of the Netherlands with a corporate seat in Amsterdam, the Netherlands (the “European Borrower” and together with the US Borrowers, each a “Borrower” and collectively, the “Borrowers”), each lender from time to time party to the Credit Agreement referred to below (each, a “Lender”, and collectively, the “Lenders”), and BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”) and L/C Issuer.

RECITALS

A.The Borrowers, the Lenders, and the Administrative Agent are party to an Amended and Restated Credit Agreement dated as of August 3, 2010 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), pursuant to which the Administrative Agent and the Lenders have extended certain credit facilities to the Borrowers.

B.The Borrowers have requested that the Administrative Agent and the Lenders agree to certain amendments with respect to the Credit Agreement, and subject to the terms and conditions set forth herein, the Administrative Agent and each of the Lenders have agreed to grant such requests of the Borrowers.

NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Defined Terms. Unless otherwise defined herein, capitalized terms used herein (including, without limitation, in the introductory paragraph and the statement of purpose hereto) shall have the meanings assigned to such terms in the Credit Agreement (as amended by this Amendment). As used herein, “Guarantor Consent” means a Guarantor Consent in substantially the form attached hereto as Exhibit A.

2.Credit Agreement Amendments. The Credit Agreement is hereby amended as follows:

(a)Amendment to Section 6.02(f) of the Credit Agreement. Section 6.02(f) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“(f)(i) beginning with the calendar quarter ending March 31, 2011,within 20 days after the end of each calendar quarter, the Borrower Agent shall deliver to the Administrative Agent (and the Administrative Agent shall promptly deliver same to Lenders) (A) a Borrowing Base Certificate calculating the US Borrowing Base prepared as of the close of business of such calendar quarter, and at such other times as the Administrative Agent may request and (B) a Borrowing Base Certificate calculating the European Borrowing Base prepared as of the close of business of such calendar quarter, and at such other times as the Administrative Agent may request and (ii) beginning with the month ending May 31, 2011,within 20days after the end of each month, the Borrower Agent shall deliver to the Administrative Agent a calculation of US Availability plus Domestic Controlled Cash prepared as of the close of business of such month based on the calculations set forth in the most recently delivered Borrowing Base Certificate delivered pursuant to clause (i). All calculations of US Availability and European Availability in any Borrowing Base Certificate shall originally be made

by Borrowers and certified by a Responsible Officer, provided that the Administrative Agent may from time to time review and adjust any such calculation (1) to reflect its reasonable estimate of declines in value of any Collateral, due to collections received in any Dominion Account, or otherwise; (2) to adjust advance rates in its Permitted Discretion to reflect changes in dilution, quality, mix and other factors affecting Collateral; and (3) to the extent the calculation is not made in accordance with this Agreement or does not accurately reflect the Availability Reserves. Notwithstanding anything in the foregoing to the contrary, Borrowing Base Certificates calculating each of the US Borrowing Base and the European Borrowing Base shall be required for any month if US Availability plus Domestic Controlled Cash is less than $100,000,000 or the Outstanding Amount of all Loans and L/C Obligations with respect to Letters of Credit is greater than $5,000,000;”

(b)Amendment to Section 6.02(g) of the Credit Agreement. Section 6.02(g) of the Credit Agreement is hereby amended and restated in its entirety as follows:

“(g)beginning with the calendar quarter ending March 31, 2011,the Borrower Agent shall provide to the Administrative Agent, within 20 days after the end of each calendar quarter, (i) with respect to the US Loan Parties, (A) a detailed aged trial balance of all Accounts as of the end of such calendar quarter, specifying each Account's Account Debtor name and address, amount, invoice date and due date, showing any discount, allowance, credit, authorized return or dispute, and including such proof of delivery, copies of invoices and invoice registers, copies of related documents, repayment histories, and status reports, (B) inventory reports by location of the US Loan Parties, and (C) such other reports and information as the Administrative Agent may reasonably request, in each case, in form satisfactory to the Administrative Agent and (ii) with respect to the European Borrower, (A) a detailed aged trial balance of all Accounts as of the end of such calendar quarter, specifying each Account's Account Debtor name and address, amount, invoice date and due date, showing any discount, allowance, credit, authorized return or dispute, and including such proof of delivery, copies of invoices and invoice registers, copies of related documents, repayment histories, and status reports, (B) inventory reports by location of the European Borrower, and (C) such other reports and information as the Administrative Agent may reasonably request, in each case, in form satisfactory to the Administrative Agent. If Accounts in an aggregate face amount of $5,000,000 or more cease to be Eligible Accounts, the Borrower Agent shall notify the Administrative Agent of such occurrence promptly after any Borrower has knowledge thereof and shall identify whether such Accounts are Eligible US Accounts or Eligible European Accounts. Notwithstanding anything in the foregoing to the contrary, each of the foregoing reports in this clause (g) shall be required for any month if US Availability plus Domestic Controlled Cash is less than $100,000,000 or the Outstanding Amount of all Loans and L/C Obligations with respect to Letters of Credit is greater than $5,000,000;”

(c)Amendment to Section 4.02 of the Credit Agreement. Section 4.02 of the Credit Agreement is hereby amended by adding the following new clause (e) immediately following clause (d) thereof:

“(e)If the proposed Credit Extension is greater than or equal to $5,000,000 or would cause the Outstanding Amount of all Loans and L/C Obligations with respect to Letters of Credit to equal or exceed $5,000,000, the Borrower Agent shall have delivered to the Administrative Agent a current Borrowing Base Certificate for each of the US Borrowing Base and the European Borrowing Base for the month most recently ended, calculated as if monthly reporting was required pursuant to Section 6.02(f).”

3.Conditions to Effectiveness. Upon the satisfaction of each of the following conditions, this Amendment shall be deemed to be effective (the date such conditions are satisfied, the “Effective Date”):

(a)the Administrative Agent shall have received counterparts of this Amendment executed by the Administrative Agent, the Required Lenders and the Borrowers;

(b)the Administrative Agent shall have received counterparts of the Guarantor Consent executed by each Guarantor; and

(c)the Borrowers shall have paid all reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation, negotiation, execution and delivery of this Amendment, including without limitation, the reasonable fees and expenses of Winston & Strawn LLP.

4.Effect of the Agreement. Except as expressly provided herein, the Credit Agreement and the other Loan Documents shall remain unmodified and in full force and effect. Except as expressly set forth herein, this Amendment shall not be deemed (a) to be a waiver of, or consent to, a modification or amendment of, any other term or condition of the Credit Agreement or any other Loan Document, (b) to prejudice any other right or rights which the Administrative Agent or the Lenders may now have or may have in the future under or in connection with the Credit Agreement or the other Loan Documents or any of the instruments or agreements referred to therein, as the same may be amended, restated, supplemented or otherwise modified from time to time, (c) to be a commitment or any other undertaking or expression of any willingness to engage in any further discussion with the Borrowers or any other Person with respect to any waiver, amendment, modification or any other change to the Credit Agreement or the Loan Documents or any rights or remedies arising in favor of the Lenders or the Administrative Agent, or any of them, under or with respect to any such documents or (d) to be a waiver of, or consent to or a modification or amendment of, any other term or condition of any other agreement by and among the Borrowers, on the one hand, and the Administrative Agent or any other Lender, on the other hand.

5.Representations and Warranties. Each Borrower hereby represents and warrants to the Administrative Agent and the Lenders as follows:

(a)After giving effect to this Amendment, no Default has occurred and is continuing.

(b)The execution, delivery and performance by each Borrower of this Amendment and by each Guarantor of the Guarantor Consent have been duly authorized by all necessary corporate and other action and do not and will not require any registration with, consent or approval of, or notice to or action by, any Person (including any Governmental Authority) in order to be effective and enforceable.

(c)The Amendment constitutes the legal, valid and binding obligation of each Borrower and each Guarantor, as applicable, and is enforceable against each such Person in accordance with their respective terms, without defense, counterclaim or offset.

(d)All representations and warranties of the Borrowers contained in Article V of the Credit Agreement are true and correct on and as of the Effective Date, except to the extent that any such representation and warranty specifically relates to an earlier date.

(e)Each Borrower is entering into this Amendment on the basis of its own investigation and for its own reasons, without reliance upon the Administrative Agent, the Lenders or any other Person.

6.Miscellaneous.

(a)This Amendment shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective successors and assigns. No third party beneficiaries are intended in connection with this Amendment.

(b)THIS AMENDMENT IS SUBJECT TO THE PROVISIONS OF SECTIONS 10.16 AND 10.17 OF THE CREDIT AGREEMENT RELATING TO GOVERNING LAW, VENUE AND WAIVER OF

RIGHT TO TRIAL BY JURY, THE PROVISIONS OF WHICH ARE BY THIS REFERENCE INCORPORATED HEREIN IN FULL.

(c)This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Transmission of signatures of any party by facsimile shall for all purposes be deemed the delivery of original, executed counterparts thereof and the Administrative Agent is hereby authorized to make sufficient photocopies thereof to assemble complete counterparty documents.

(d)This Amendment contains the entire and exclusive agreement of the parties hereto with reference to the matters discussed herein and therein. This Amendment supersedes all prior drafts and communications with respect thereto. This Amendment may not be amended except in accordance with the provisions of Section 10.01 of the Credit Agreement.

(e)If any term or provision of this Amendment shall be deemed prohibited by or invalid under any applicable law, such provision shall be invalidated without affecting the remaining provisions of this Amendment or the Credit Agreement, respectively.

(f)Each Borrower covenants to pay to or reimburse the Administrative Agent, upon demand, for all reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation, negotiation, execution and delivery of this Amendment.

(g)This Amendment shall constitute a “Loan Document” under and as defined in the Credit Agreement.

[Signature Pages Follow]

[First Amendment - Imation]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.

IMATION CORP., as a Borrower

By: _________________________________

Name: _________________________________

Title: _________________________________

IMATION ENTERPRISES CORP., as a Borrower

By: _________________________________

Name: _________________________________

Title: _________________________________

IMATION EUROPE B.V., as a Borrower

By: _________________________________

Name: _________________________________

Title: _________________________________

[First Amendment - Imation]

BANK OF AMERICA, N.A., as Administrative Agent

By: _________________________________

Name: _________________________________

Title: _________________________________

BANK OF AMERICA, N.A., as L/C Issuer and as a Lender

By: _________________________________

Name: _________________________________

Title: _________________________________

[First Amendment - Imation]

JPMORGAN CHASE BANK, N.A., as a Lender

By: _________________________________

Name: _________________________________

Title: _________________________________

[First Amendment - Imation]

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as a Lender

By: _________________________________

Name: _________________________________

Title: _________________________________

[First Amendment - Imation]

US BANK NATIONAL ASSOCIATION, as a Lender

By: _________________________________

Name: _________________________________

Title: _________________________________

[First Amendment - Imation]

WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender

By: _________________________________

Name: _________________________________

Title: _________________________________

13

[Third Amendment - Imation]CHL:45603.3

[First Amendment - Imation]

FIFTH THIRD BANK, as a Lender

By: _________________________________

Name: _________________________________

Title: _________________________________

CHL:45603.3

Exhibit A to First Amendment

[Guarantor Consent - Imation]

Guarantor Consent

Each of the undersigned, in its capacity as a Guarantor, acknowledges that its consent to the foregoing Amendment is not required, but each of the undersigned nevertheless does hereby consent to the foregoing Amendment (together with all prior amendments) and to the documents and agreements referred to therein. Nothing herein shall in any way limit any of the terms or provisions of the Guaranty of the undersigned or the Collateral Documents executed by the undersigned in the Administrative Agent's and the Lenders' favor, or any other Loan Document executed by the undersigned (as the same may be amended from time to time), all of which are hereby ratified and affirmed in all respects.

IMATION FUNDING CORP., as a Guarantor

By: __________________________________

Name: __________________________________

Title: __________________________________

IMATION LATIN AMERICA CORP., as a Guarantor

By: __________________________________

Name: __________________________________

Title: __________________________________

MEMOREX PRODUCTS, INC., as a Guarantor

By: __________________________________

Name: __________________________________

Title: __________________________________

IMN DATA STORAGE LLC, as a Guarantor

By: __________________________________

Name: __________________________________

Title: __________________________________

IMATION GOVERNMENT CORP., as a Guarantor

By: __________________________________

Name: __________________________________

Title: __________________________________

EX-31

Exhibit 31.1

Certification Pursuant to Section 302

of the Sarbanes-Oxley Act of 2002

     I, Mark E. Lucas, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Imation Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a -15(e) and 15d -15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a -15(f) and 15d -15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 9, 2011
By:	/s/ MARK E. LUCAS
	Mark E. Lucas,
	President and Chief Executive Officer

EX-31

Exhibit 31.2

Certification Pursuant to Section 302

of the Sarbanes-Oxley Act of 2002

     I, Paul R. Zeller, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Imation Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a -15(e) and 15d -15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a -15(f) and 15d -15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 9, 2011
By:	/s/ PAUL R. ZELLER
	Paul R. Zeller,
	Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32.1

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

     In connection with the Quarterly Report of Imation Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2011, as filed with the Securities and Exchange Commission (the “Report”), I, Mark E. Lucas, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 9, 2011

/s/ MARK E. LUCAS  

Mark E. Lucas, 

President and Chief Executive Officer 

EX-32

Exhibit 32.2

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

     In connection with the Quarterly Report of Imation Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2011, as filed with the Securities and Exchange Commission (the “Report”), I, Paul R. Zeller, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 9, 2011

/s/ PAUL R. ZELLER  

Paul R. Zeller, 

Senior Vice President and Chief Financial Officer 

XML



Condensed Consolidated Balance Sheets (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Current assets
Cash and cash equivalents	$ 257.8	$ 304.9
Accounts receivable, net	219.8	258.8
Inventories	221.8	203.3
Other current assets	61.7	74.2
Total current assets	761.1	841.2
Property, plant and equipment, net	61.9	66.9
Intangible assets, net	320.8	320.4
Goodwill	21.9	0
Other assets	24.0	22.5
Total assets	1,189.7	1,251.0
Current liabilities
Accounts payable	200.9	219.2
Other current liabilities	138.9	172.3
Total current liabilities	339.8	391.5
Other liabilities	79.2	77.8
Total liabilities	419.0	469.3
Shareholders’ equity	770.7	781.7
Total liabilities and shareholders’ equity	$ 1,189.7	$ 1,251.0

XML



Condensed Consolidated Statements of Cash Flows (USD $) In Millions	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash Flows from Operating Activities:
Net loss	$ (19.7)	$ (18.3)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	5.7	9.1
Amortization	12.2	11.8
Deferred income taxes, net of valuation allowance	0.8	(6.3)
Goodwill impairment	1.6	23.5
Asset disposals	7	0
Inventory write-offs	1.5	0
Stock-based compensation	3.6	3.2
Pension settlement	1	0
Other	6.5	2.4
Changes in operating assets and liabilities:
Litigation settlement payment	(2.6)	0
Accounts receivable	46.1	66.6
Inventories	(15.3)	6.0
Other assets	(3.9)	(0.3)
Accounts payable	(22.6)	26.7
Accrued payroll and other liabilities	(47.7)	(24.4)
Restricted cash	10.5	2.5
Net cash (used in) provided by operating activities	(15.3)	102.5
Cash Flows from Investing Activities:
Capital expenditures	(4.5)	(3.5)
Acquisitions	(25.5)	0
License agreement payment	0	(5.0)
Other, net	0	0.1
Net cash used in investing activities	(30.0)	(8.4)
Cash Flows from Financing Activities:
Purchase of treasury stock	(6.8)	0
Exercise of stock options	0.6	0
Net cash used in financing activities	(6.2)	0
Effect of exchange rate changes on cash and cash equivalents	4.4	(6.2)
Net change in cash and cash equivalents	(47.1)	87.9
Cash and cash equivalents — beginning of period	304.9	163.4
Cash and Cash Equivalents - end of period	$ 257.8	$ 251.3

XML



Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Jul. 29, 2011
Entity Information [Line Items]
Entity Registrant Name	IMATION CORP.
Entity Central Index Key	0001014111
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		38,661,933

XML



Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Stock Based Compensation [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Stock-Based Compensation

Stock compensation expense consisted of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2011		2010		2011		2010
Stock compensation expense	$	1.8	$	1.5	$	3.6	$	3.2

The 2011 Stock Incentive Plan was approved and adopted by our shareholders on May 4, 2011 and became effective immediately. The 2011 Stock Incentive Plan permits the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, performance awards, stock awards and other stock-based awards. The aggregate number of shares of our common stock that may be issued under all stock-based awards made under the 2011 Stock Incentive Plan is 4.5 million and the maximum number of shares that may be awarded pursuant to grants of awards other than options and stock appreciation rights is 1.1 million. The number of shares available for awards, as well as the terms of outstanding awards, is subject to adjustments as provided in the 2011 Stock Incentive Plan for stock splits, stock dividends, recapitalization and other similar events. Awards may be granted under the 2011 Stock Incentive Plan until the earlier to occur of May 3, 2021 or the date on which all shares available for awards under the 2011 Stock Incentive Plan have been purchased or acquired; provided, however, that incentive stock options may not be granted after February 10, 2021. As a result of the approval and adoption of the 2011 Stock Incentive Plan, no further shares are available for grant under the 2008 Stock Incentive Plan.

As of June 30, 2011, we had stock-based compensation awards outstanding under five plans (collectively, the Stock Plans) consisting of stock options, restricted stock and restricted stock units. As of June 30, 2011, there were 3,943,462 shares available for grant under our 2011 Stock Incentive Plan. No further shares were available for grant under any other Stock Plan.

Stock Options

The following table summarizes our stock option activity:

	Stock Options		Weighted Average Exercise Price
Outstanding December 31, 2010	4,916,088		$	24.10
Granted	1,291,580		9.64
Exercised	(45,429	)	10.13
Cancelled	(378,680	)	36.22
Forfeited	(82,111	)	14.76
Outstanding June 30, 2011	5,701,448		$	20.26
Exercisable as of June 30, 2011	3,395,297		$	26.69

The outstanding options are non-qualified and generally have a term of ten years. For employees, the options granted prior to May 2011 generally become exercisable and vest 25 percent per year beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. Grants during and after May 2011 become exercisable and vest 33 percent per year beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. For directors, the options generally become exercisable in full on the first anniversary of the grant date.

The weighted average grant date fair value of options that were granted for the six months ended June 30, 2011 was $4.25.

The following table summarizes our weighted average assumptions used in the valuation of options:

	2011
Volatility	44.0	%
Risk-free interest rate	2.2	%
Expected life (months)	70
Dividend yield	—	%

As of June 30, 2011, there was $9.2 million of total unrecognized compensation expense related to non-vested stock options granted under our Stock Plans. That expense is expected to be recognized over a weighted average period of 2.5 years.

Restricted Stock

The following table summarizes our restricted stock activity:

	Restricted Stock		Weighted Average Grant Date Fair Value Per Share
Nonvested as of December 31, 2010	739,196		$	11.34
Granted	345,819		9.58
Vested	(247,432	)	12.51
Forfeited	(45,978	)	12.12
Nonvested as of June 30, 2011	791,605		$	10.16

The cost of the awards is determined using the fair value of the Company’s common stock on the date of the grant and compensation is recognized on a straight-line basis over the requisite vesting period. For employees, the restricted shares granted prior to May 2011 generally vest 25 percent per year beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. Grants during and after May 2011 become exercisable and vest 33 percent per year beginning on the first anniversary of the grant date, subject to the employee’s continuing service to the Company. For directors, the restricted shares generally vest in full on the first anniversary of the grant date.

As of June 30, 2011, there was $7.3 million of total unrecognized compensation expense related to non-vested restricted stock granted under our Stock Plans. That expense is expected to be recognized over a weighted average period of 2.5 years.

XML



Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information [Abstract]

Segment Reporting Disclosure [Text Block]

Segment Information

 Our business is organized, managed and internally and externally reported as segments differentiated by the regional markets we serve: Americas, Europe, North Asia and South Asia. Each of these geographic segments has responsibility for selling all of our product lines.

We evaluate segment performance based on revenue and operating income. Revenue for each segment is generally based on customer location where the product is shipped. The operating income reported in our segments excludes corporate and other unallocated amounts. Although such amounts are excluded from the business segment results, they are included in reported consolidated earnings. Corporate and unallocated amounts include litigation settlement expense, goodwill impairment expense, research and development expense, corporate expense, stock-based compensation expense, inventory write-offs and restructuring and other expenses which are not allocated to the segments.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2011		2010		2011		2010
Net Revenue
Americas	$	142.8	$	181.2	$	285.9	$	342.9
Europe	64.1		64.5		126.4		151.2
North Asia	80.1		73.0		154.3		154.3
South Asia	36.0		35.7		72.9		71.8
Total	$	323.0	$	354.4	$	639.5	$	720.2

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2011			2010			2011			2010
Operating Income (Loss)
Americas	$	1.1		$	9.4		$	3.1		$	18.5
Europe	2.3			(1.5		)	3.2			0.3
North Asia	6.1			2.4			9.4			5.5
South Asia	0.5			1.0			0.9			2.0
Corporate and unallocated	(19.3		)	(35.1		)	(29.3		)	(49.9		)
Total	$	(9.3	)	$	(23.8	)	$	(12.7	)	$	(23.6	)

Corporate and unallocated amounts above include goodwill impairment, inventory write-offs related to our restructuring programs, pension settlement, facility disposal and restructuring and other expense of $10.7 million and $26.9 million for the three months ended June 30, 2011 and 2010, respectively. Corporate and unallocated amounts above include goodwill impairment, inventory write-offs related to our restructuring programs, pension settlement, facility disposal and restructuring and other expense of $14.4 million and $30.9 million for the six months ended June 30, 2011 and 2010, respectively.

We have three major product categories: traditional storage, secure and scalable storage, and electronics and accessories. During the three months ended June 30, 2011, we changed the name of the emerging storage product category to secure and scalable storage to better reflect our direction and future product offerings. Traditional storage products include optical products, magnetic products and other traditional storage media products. Optical products primarily include DVDs, CDs and Blu-ray disc recordable media. Magnetic products primarily include data storage tape media. Other traditional storage products primarily include optical drives and audio and video tape media. Secure and scalable products include flash memory and hard disk drive products, including secure USB flash drives, external hard disk drives, removable hard disk drives and solid state drives. Electronics and accessories primarily include CD players, alarm clocks, portable boom boxes, MP3 players, Apple iPad®, iPod® and iPhone® accessories, headphones, speakers and gaming accessories.

Net revenue by product category was as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2011		2010		2011		2010
Net Revenue
Traditional storage
Optical products	$	129.3	$	153.2	$	257.0	$	310.6
Magnetic products	85.3		84.2		167.8		174.2
Other traditional storage	13.0		16.7		25.6		32.8
Total traditional storage	227.6		254.1		450.4		517.6
Secure and scalable storage	55.4		48.9		108.1		106.4
Electronics and accessories	40.0		51.4		81.0		96.2
Total	$	323.0	$	354.4	$	639.5	$	720.2

XML



Acquisitions

6 Months Ended

Jun. 30, 2011

Acquisitions [Abstract]

Business Combination Disclosure [Text Block]

Acquisitions

MXI Security

On June 4, 2011, we acquired substantially all of the assets of MXI Security, a leader in high-security and privacy technologies, from Memory Experts International Inc. MXI Security sells encrypted and biometric USB drives (MXI Stealth Key), encrypted and biometric hard disk drives (MXI Stealth HD), secure portable desktop solutions (Stealth Zone), and software solutions. MXI Security products contain various security features such as password authentication, encryption, and remote manageability. The preliminary purchase price consisted of a cash payment of $24.5 million and the estimated fair value of future contingent consideration of $9.2 million, totaling $33.7 million.

The preliminary purchase price allocation resulted in goodwill of $21.9 million, made up of expected strategic synergies and intangible assets that do not qualify for separate recognition. MXI Security is included in our existing Americas operating segment and functions as a business with discrete financial information available. Therefore, MXI Security is a separate reporting unit for the purposes of goodwill impairment testing. Goodwill will be tested for impairment annually or when there are indications that impairment might exist.

The following table illustrates our preliminary allocation of the purchase price to the assets acquired and liabilities assumed:

(In millions)	Amount
Accounts receivable and other assets	$	0.8
Inventories	1.1
Intangible assets	10.6
Goodwill	21.9
Accounts payable and other liabilities	(0.7		)
	$	33.7

Our preliminary allocation of the purchase price to the assets acquired and liabilities assumed resulted in the recognition of the following intangible assets:

			Weighted
(In millions)	Amount		Average Life
Trademark	$	0.7	10 years
Supply agreement	1.4		3 years
Customer relationships	1.0		8 years
Proprietary technology	7.5		6 years
	$	10.6

The effects of the acquisition did not materially impact our 2011 results of operations. Therefore, pro forma disclosures are not required and, accordingly, are not included.

BeCompliant Corporation (doing business as Encryptx)

On February 28, 2011, we acquired substantially all of the assets of BeCompliant Corporation (doing business as Encryptx), a technology leader in encryption and security solutions for removable storage devices and removable storage media. The purchase price was $2.3 million, consisting of a cash payment of $1.0 million and the estimated fair value of future contingent consideration of $1.3 million.

The purchase price allocation resulted in goodwill of $1.6 million, made up of expected strategic synergies and intangible assets that do not qualify for separate recognition. The goodwill was allocated to our existing Americas-Commercial reporting unit. Goodwill is considered impaired when its carrying amount exceeds its implied fair value. As of March 31, 2011, the carrying amount of all of our reporting units significantly exceeded their fair value and we performed an impairment test. Based on the goodwill test performed as of March 31, 2011, we determined that the carrying amount of the goodwill in the Americas-Commercial reporting unit, including the assets of Encryptx, exceeded the implied fair value and, therefore, the goodwill was fully impaired. As a result, a $1.6 million goodwill impairment charge was recorded during the three months ended March 31, 2011 in the Condensed Consolidated Statements of Operations.

The effects of the acquisition did not materially impact our 2011 results of operations. Therefore, pro forma disclosures are not required and, accordingly, are not included.

XML



Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes [Abstract]

Income Tax Disclosure [Text Block]

Income Taxes

We are subject to income tax in numerous jurisdictions and the use of estimates is required in determining our provision for income taxes. For the three and six month periods ended June 30, 2011, we recorded an income tax provision of $0.7 million and $2.4 million, respectively. The income tax provision (benefit) is based on the estimated annual effective tax rate for the year applied to “ordinary” income (loss). Ordinary income (loss) is pre-tax income (loss) excluding unusual or infrequently occurring discrete items. The overall estimated annual effective tax rate calculation excludes jurisdictions reporting losses for which no tax benefit is expected to be recognized during the year. A separate estimated annual effective tax rate was calculated for the jurisdictions reporting losses for which no tax benefit can be recognized. The effective income tax rate for the three and six months ended June 30, 2011 was (5.9) percent and (13.9) percent, respectively, compared with 41.2 percent and 39.9 percent in the same periods last year. The effective rate changes were primarily due to the full valuation allowance on U.S. deferred tax assets and the mix of taxable income/loss by country.

The effective income tax rate for the three and six month periods ended June 30, 2011 differs from the U.S. federal statutory rate of 35 percent primarily due to the full valuation allowance on U.S. deferred tax assets and the effects of foreign tax rate differential.

We conduct business globally. As a result, we file income tax returns and are subject to examination by taxing authorities in various jurisdictions throughout the world. Our U.S. federal income tax returns for 2006 through 2009 remain subject to examination by the Internal Revenue Service (IRS). The IRS completed its field work for the 2006 through 2008 examination in the second quarter of 2010 and has proposed adjustments. The matter is currently in IRS appeal. Due to a valuation allowance against our U.S. deferred tax assets, if issues under appeal were lost, we expect the impact to our Consolidated Statements of Operations would only be interest in excess of the amounts already accrued. The years 2004 through 2009 remain subject to examination by foreign tax jurisdictions as well as state and city tax jurisdictions. In the event that we have determined not to file tax returns with a particular state or city, all years remain subject to examination by that tax jurisdiction.

We accrue for the effects of uncertain tax positions and the related potential penalties and interest. There were no material adjustments to our recorded unrecognized tax benefits during the six months ended June 30, 2011. Our liability related to uncertain tax positions was $17.5 million as of each June 30, 2011 and December 31, 2010. It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of our unrecognized tax positions will increase or decrease during the next twelve months.

Taxes collected from customers that were included in revenue for the three months ended June 30, 2011 and 2010 were $5.2 million and $6.1 million, respectively. Taxes collected from customers and remitted to governmental authorities that were included in revenue for the six months ended June 30, 2011 and 2010 were $10.2 million and $15.8 million, respectively.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Disclosures [Text Block]

Fair Value Measurements

At June 30, 2011 and 2010, our financial instruments included cash and cash equivalents, accounts receivable, accounts payable and derivative contracts. The fair values of cash and cash equivalents, accounts receivable and accounts payable approximated carrying values due to the short-term nature of these instruments. In addition, certain derivative instruments are recorded at fair value as discussed below.

Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets for identical assets); Level 2 (significant observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The assets in our postretirement benefit plans are measured at fair value on a recurring basis (at least annually). See Note 9 herein for additional discussion concerning pension and postretirement benefit plans.

We maintain a foreign currency exposure management policy that allows the use of derivative instruments, principally foreign currency forwards, option contracts and option combination strategies to manage risks associated with foreign exchange rate volatility. Generally, these contracts are entered into to fix the U.S. dollar amount of the eventual cash flows. The derivative instruments range in duration at inception up to fifteen months. We do not hold or issue derivative financial instruments for speculative or trading purposes and we are not a party to leveraged derivatives.

We are exposed to the risk of nonperformance by our counter-parties, but we do not anticipate nonperformance by any of these counter-parties. We actively monitor our exposure to credit risk through the use of credit approvals and credit limits and by using major international banks and financial institutions as counter-parties.

As of June 30, 2011, we held derivative instruments that are required to be measured at fair value on a recurring basis. Our derivative instruments consist of currency forwards, option contracts and option combination strategies. The fair value of our derivative instruments is determined based on inputs that are observable in the public market, but are other than publicly quoted prices (Level 2).

Hedge gains of $0.2 million and $0.3 million were reclassified into the Condensed Consolidated Statements of Operations during the three months ended June 30, 2011 and 2010, respectively. Hedge gains of $0.2 million and $0.4 million were reclassified into the Condensed Consolidated Statements of Operations during the six months ended June 30, 2011 and 2010, respectively. The amount of net deferred gains on foreign currency cash flow hedges included in accumulated other comprehensive income (loss) in shareholders’ equity as of June 30, 2011 was $1.0 million, pre-tax, which, depending on market factors, is expected to be reversed in the Condensed Consolidated Balance Sheet or be reclassified into operations during the next three to six months.

Our financial assets and liabilities that are measured at fair value on a recurring basis were as follows:

	June 30, 2011							December 31, 2010
(In millions)	Level 1		Level 2			Level 3		Level 1		Level 2			Level 3
Derivative assets
Foreign currency option contracts	$	—	$	0.4		$	—	$	—	$	3.5		$	—
Foreign currency forward contracts	—		—			—		—		—			—
Derivative liabilities
Foreign currency option contracts	—		(1.2		)	—		—		(2.3		)	—
Foreign currency forward contracts	—		—			—		—		—			—
Total	$	—	$	(0.8	)	$	—	$	—	$	1.2		$	—

Cash Flow Hedges

We attempt to mitigate the risk that forecasted cash flows denominated in foreign currencies may be adversely affected by changes in currency exchange rates through the use of option, forward and combination option contracts. The degree of our hedging can fluctuate based on management judgment and forecasted projections. We formally document all relationships between hedging instruments and hedged items, as well as our risk management objective and strategy for undertaking the hedge items. This process includes linking all derivatives to forecasted transactions.

We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in the cash flows of hedged items. Gains and losses related to cash flow hedges are deferred in accumulated other comprehensive income (loss) with a corresponding asset or liability. When the hedged transaction occurs, the gains and losses in accumulated other comprehensive income (loss) are reclassified into the Condensed Consolidated Statements of Operations in the same line as the item being hedged. If at any time it is determined that a derivative is not highly effective as a hedge, we discontinue hedge accounting prospectively, with deferred gains and losses being recognized in current period operations.

Other Hedges

We enter into foreign currency forward contracts, generally with durations of less than two months, to manage the foreign currency exposure related to our monetary assets and liabilities denominated in foreign currencies. We record the estimated fair value of these forwards within other current assets or other current liabilities in the Condensed Consolidated Balance Sheets, and all changes in their fair value are immediately recognized in the Condensed Consolidated Statements of Operations.

The notional amounts and fair values of our derivative instruments in the Condensed Consolidated Financial Statements were as follows:

	June 30, 2011							December 31, 2010
			Fair Value							Fair Value
(In millions)	Notional Amount		Other Current Assets		Other Current Liabilities			Notional Amount		Other Current Assets		Other Current Liabilities
Cash flow hedges designated as hedging instruments	$	123.0	$	0.4	$	(1.2	)	$	246.0	$	3.5	$	(2.3	)
Other hedges not receiving hedge accounting	80.0		—		(0.1		)	47.1		—		—
Total	$	203.0	$	0.4	$	(1.3	)	$	293.1	$	3.5	$	(2.3	)

On June 30, 2011 we entered into certain hedges not receiving hedge accounting treatment. In accordance with trade date accounting, these hedges and related exposures are recorded as of June 30, 2011, but do not have a value until the subsequent day.

The derivative gains and losses in the Condensed Consolidated Statements of Operations were as follows:

(In millions)	Pretax Gain (Loss) Recognized in Other Comprehensive Income on Effective Portion of Derivative			Pretax Gain (Loss) on Effective Portion of Derivative Reclassification from Accumulated Other Comprehensive Income to Cost of Goods Sold, net		Pretax Gain (Loss) Recognized in the Condensed Statements of Operations in Other Expenses, net
For the three months ended June 30, 2011
Cash flow hedges designated as hedging instruments	$	(1.2	)	$	0.2	$	—
Other hedges not receiving hedge accounting	—			—		(0.2		)
Total	$	(1.2	)	$	0.2	$	(0.2	)
For the three months ended June 30, 2010
Cash flow hedges designated as hedging instruments	$	0.1		$	0.3	$	—
Other hedges not receiving hedge accounting	—			—		(0.3		)
Total	$	0.1		$	0.3	$	(0.3	)

(In millions)	Pretax Gain (Loss) Recognized in Other Comprehensive Income on Effective Portion of Derivative			Pretax Gain (Loss) on Effective Portion of Derivative Reclassification from Accumulated Other Comprehensive Income to Cost of Goods Sold, net		Pretax Gain (Loss) Recognized in the Condensed Statements of Operations in Other Expenses, net
For the six months ended June 30, 2011
Cash flow hedges designated as hedging instruments	$	(2.0	)	$	0.2	$	—
Other hedges not receiving hedge accounting	—			—		(0.1		)
Total	$	(2.0	)	$	0.2	$	(0.1	)
For the six months ended June 30, 2010
Cash flow hedges designated as hedging instruments	$	0.8		$	0.4	$	—
Other hedges not receiving hedge accounting	—			—		(1.2		)
Total	$	0.8		$	0.4	$	(1.2	)

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Retirement Plans

6 Months Ended

Jun. 30, 2011

Retirement Plans [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

Retirement Plans

Pension Plans

Effective January 1, 2010, the United States defined benefit pension plan was amended to exclude new hires and rehires from participating in the plan. In addition, we eliminated benefit accruals under the U.S. defined benefit pension plan as of January 1, 2011, thus “freezing” the plan. Under the plan freeze, no pay credits will be made to a participant's account balance after December 31, 2010. However, interest credits will continue in accordance with the annual update process.

In connection with actions taken under our announced restructuring programs, the number of employees accumulating benefits under our pension plan in the United States continues to decline. Participants in our U.S. defined benefit pension plan have the option of receiving cash lump sum payments when exiting the plan, which a number of participants exiting the plan have elected to receive. Lump sum payments in 2011 have exceeded our 2010 service and interest costs. As a result, a partial settlement event occurred during the three months ended June 30, 2011 and we recognized a loss of $1.0 million. The settlement loss is included in restructuring and other expense in our Condensed Consolidated Statements of Operations. Additionally, in connection with the settlement and as required by pension accounting, we remeasured the funded status of our U.S. defined benefit pension plan as of June 30, 2011.

During the six months ended June 30, 2011, we contributed $10.7 million to our worldwide pension plans. We presently anticipate contributing approximately $1 million to $3 million to fund our worldwide pension plans during the remaining six months of 2011.

Components of net periodic pension cost included the following:

	United States						International						United States						International
	Three Months Ended June 30,												Six Months Ended June 30,
(In millions)	2011			2010			2011			2010			2011			2010			2011			2010
Service cost	$	—		$	0.4		$	0.1		$	0.2		$	—		$	0.8		$	0.2		$	0.4
Interest cost	1.1			1.2			0.7			0.8			2.2			2.4			1.4			1.4
Expected return on plan assets	(1.6		)	(1.4		)	(0.9		)	(0.8		)	(3.1		)	(2.9		)	(1.7		)	(1.5		)
Amortization of net actuarial (gain) loss	0.3			—			0.1			—			0.4			—			0.2			—
Amortization of prior service cost (credit)	—			0.1			(0.1		)	0.1			—			0.2			(0.2		)	0.1
Net periodic pension cost	$	(0.2	)	$	0.3		$	(0.1	)	$	0.3		$	(0.5	)	$	0.5		$	(0.1	)	$	0.4
Settlement	1.0			—			—			—			1.0			—			—			—
Total pension costs	$	0.8		$	0.3		$	(0.1	)	$	0.3		$	0.5		$	0.5		$	(0.1	)	$	0.4

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Recently Issued or Adopted Accounting Pronouncements

6 Months Ended

Jun. 30, 2011

Recently Issued or Adopted Accounting Pronouncements [Abstract]

Recently Adopted New Accounting Pronouncements [Text Block]

Recently Issued or Adopted Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (FASB) issued amended guidance to enhance comparability between entities that report under generally accepted accounting principles in the United States (U.S. GAAP) and International Financial Reporting Standards (IFRS) and to provide a more consistent method of presenting non-owner transactions that affect an entity's equity. This guidance eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders' equity and requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. Regardless of whether one or two statements are presented, an entity is required to show reclassification adjustments on the face of the financial statements for items that are reclassified from other comprehensive income to net income. This guidance is effective for interim and annual reporting periods beginning January 1, 2012. The adoption of this guidance will change the presentation of our Consolidated Statements of Shareholders' Equity and Comprehensive Income.

In May 2011, the FASB issued amended disclosure requirements to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. This guidance changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This guidance is effective for reporting periods beginning January 1, 2012. We do not expect these disclosures to have a material impact on our Condensed Consolidated Financial Statements.

In January 2010, the FASB issued additional disclosure requirements for assets and liabilities held at fair value. Specifically, the new guidance requires a gross presentation of activities within the Level 3 roll forward and adds a new requirement to disclose transfers in and out of Level 1 and 2 measurements. This guidance is applicable to all entities currently required to provide disclosures about recurring and nonrecurring fair value measurements. The effective date for these disclosures for Imation was January 1, 2010, except for the gross presentation of the Level 3 roll forward information, which was required for interim reporting periods beginning January 1, 2011. The disclosures did not have a material impact on our Condensed Consolidated Financial Statements.

In December 2010, the FASB issued additional guidance for entities with reporting units that have carrying amounts equal to zero or are negative. These entities are required to assess whether it is more likely than not that the reporting units' goodwill is impaired. If it is determined that it is more likely than not that the goodwill of one or more of its reporting units is impaired, then Step 2 of the goodwill impairment test for those reporting unit(s) should be performed. Any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings in the period of adoption. Any goodwill impairments occurring after the initial adoption of the amendments should be included in earnings. The effective date for these disclosures for Imation was January 1, 2011. This guidance did not have a material impact on our Condensed Consolidated Financial Statements.

In December 2010, the FASB issued additional and amended annual disclosure requirements for supplementary pro forma information related to business combinations. The effective date for this guidance for Imation is prospective for business combinations on or after January 1, 2011. We do not expect these disclosures to have a material impact on our Condensed Consolidated Financial Statements.

A variety of proposed potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to our Condensed Consolidated Financial Statements.

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Supplemental Balance Sheet Information

6 Months Ended

Jun. 30, 2011

Supplemental Balance Sheet Information [Abstract]

Supplemental Balance Sheet Disclosures [Text Block]

Supplemental Balance Sheet Information

	June 30,			December 31,
(In millions)	2011			2010
Accounts Receivable
Accounts receivable	$	238.1		$	279.4
Less reserves and allowances*	(18.3		)	(20.6		)
Accounts receivable, net	$	219.8		$	258.8
Inventories
Finished goods	$	194.0		$	175.0
Work in process	18.2			10.6
Raw materials and supplies	9.6			17.7
Total inventories	$	221.8		$	203.3
Other Current Assets
Deferred income taxes	$	8.1		$	9.1
Restricted cash	8.5			17.9
Assets held for sale (Note 7)	3.2			7.2
Taxes receivable	5.2			2.0
Other	36.7			38.0
Total other current assets	$	61.7		$	74.2
Property, Plant and Equipment (Note 7)
Property, plant and equipment	$	250.1		$	349.3
Less accumulated depreciation	(188.2		)	(282.4		)
Property, plant and equipment, net	$	61.9		$	66.9
Other Assets
Deferred income taxes	$	13.1		$	12.2
Other	10.9			10.3
Total other assets	$	24.0		$	22.5
Other Current Liabilities
Rebates	$	43.5		$	53.4
Levies	21.9			23.6
Accrued payroll	13.2			15.6
Litigation settlement — current	8.3			10.6
Employee separation costs	4.6			10.5
Other	47.4			58.6
Total other current liabilities	$	138.9		$	172.3
Other Liabilities
Pension	$	17.4		$	27.0
Litigation settlement — long-term	15.5			15.1
Deferred income taxes	3.7			3.4
Other	42.6			32.3
Total other liabilities	$	79.2		$	77.8

* Accounts receivable reserves and allowances include estimated amounts for customer returns, discounted terms and the inability of certain customers to make the required payment.

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Intangible Assets and Goodwill

6 Months Ended

Jun. 30, 2011

Intangible Assets and Goodwill [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

Intangible Assets and Goodwill

Intangible Assets

The components of our amortizable intangible assets were as follows:

(In millions)	Trade Names			Software			Customer Relationships			Other			Total
June 30, 2011
Gross carrying amount	$	342.7		$	55.1		$	60.6		$	8.3		$	466.7
Accumulated amortization	(50.7		)	(50.2		)	(41.2		)	(3.8		)	(145.9		)
Intangible assets, net	$	292.0		$	4.9		$	19.4		$	4.5		$	320.8
December 31, 2010
Gross carrying amount	$	332.4		$	54.2		$	58.8		$	8.3		$	453.7
Accumulated amortization	(44.9		)	(49.1		)	(36.2		)	(3.1		)	(133.3		)
Intangible assets, net	$	287.5		$	5.1		$	22.6		$	5.2		$	320.4

Amortization expense for intangible assets consisted of the following:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2011		2010		2011		2010
Amortization expense	$	6.2	$	6.0	$	12.2	$	11.8

Based on the intangible assets in service as of June 30, 2011, estimated amortization expense for the remainder of 2011 and for each of the next four years ending December 31 is as follows:

(In millions)	2011		2012		2013		2014		2015
Amortization expense	$	12.0	$	25.4	$	20.1	$	14.8	$	12.8

Goodwill

See Note 4 herein for discussion of acquisitions and related goodwill acquired during the six months ended June 30, 2011.

Goodwill consists of the following:

(In millions)	June 30,			December 31,
	2011			2010
Goodwill	$	175.8		$	152.3
Accumulated impairment losses	(153.9		)	(152.3		)
Goodwill, net of accumulated impairment losses	$	21.9		$	—

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Litigation, Commitments and Contingencies

6 Months Ended

Jun. 30, 2011

Litigation, Commitments and Contingencies [Abstract]

Legal Matters and Contingencies [Text Block]

Litigation, Commitments and Contingencies

We are the subject of various pending or threatened legal actions in the ordinary course of our business. All such matters are subject to many uncertainties and outcomes that are not predictable with assurance. Additionally, our electronics and accessories business is subject to allegations of patent infringement by our competitors as well as by non-practicing entities (NPEs), sometimes referred to as “patent trolls,” who may seek monetary settlements from us, our competitors, suppliers and resellers. Consequently, as of June 30, 2011, we are unable to ascertain the ultimate aggregate amount of any monetary liability or financial impact that we may incur with respect to these matters. While these matters could materially affect operating results depending upon the final resolution in future periods, it is our opinion that after final disposition, any monetary liability beyond that provided in the Condensed Consolidated Balance Sheet as of June 30, 2011 would not be material to our Condensed Consolidated Financial Statements.

On June 19, 2009, Advanced Research Corp. (ARC) sued Imation in Ramsey County District court for breach of contract relating to a supply agreement under which we purchase our requirements for magnetic heads to write servo patterns on magnetic tape prior to sale of the finished cartridges, requesting the court to order that Imation pay damages and return the purchased heads to ARC. ARC is alleging that we misrepresented the volumes of heads that we would require, and that ARC invested in a new facility in reliance on our forecasts. ARC has claimed damages in excess of $27.2 million and we have filed counterclaims against ARC for its failure to comply with the supply agreement and other agreements, claiming damages in excess of $8.5 million. In March 2010, both Imation and ARC filed motions for partial summary judgment, which motions were denied by the court on July 6, 2010. On July 27, 2010, the court granted ARC's motion to amend its complaint to add a claim for trade secret misappropriation. On March 29, 2011, Imation moved for summary judgment on the claim of trade secret misappropriation. On July 21, 2011, the court granted Imation's summary judgment motion to dismiss ARC's trade secret misappropriation claim. A trial date has been set for October 2011. Imation believes that the ultimate resolution of this legal proceeding will not have a material adverse effect on the Company's financial condition, results of operations or cash flows.

In some countries, primarily Europe and Canada, the sale of recordable optical media is subject to a private copying levy, which is an extra charge on purchases of these products. Imation collects the levies upon sale, and submits payment of the levies to copyright collective non-government agencies for distribution to content providers as “fair compensation” for the harm caused to them due to private copies made by natural persons of protected works. For several years the amount of the levy in Europe has been in question and the subject of various litigation and law making activities. We have continued to accrue the levies but are awaiting resolution before submitting some of the required payments. Depending on the final outcome of the various litigation and law making activities, if some amount less than what we have accrued does not need to be paid, this amount will be recorded as a reduction to our cost of goods sold in the period that the resolution is determined. During the six months ended June 30, 2011, we reversed $5.5 million of the accrual because of court decisions which clarify the circumstances in which we are required to pay certain levies. The reversal was recorded as a benefit to cost of goods sold in the Condensed Consolidated Statements of Operations

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Restructuring and Other Expense

6 Months Ended

Jun. 30, 2011

Restructuring and Other Expense [Abstract]

Restructuring and Related Activities Disclosure [Text Block]

Restructuring and Other Expense

The components of our restructuring and other expense included in the Condensed Consolidated Statements of Operations were as follows:

	Three Months Ended		Six Months Ended
(In millions)	June 30, 2011		June 30, 2011
Restructuring
Severance and related	$	0.7	$	1.3
Lease termination costs	0.2		0.4
Other	$	0.3	$	0.4
Total restructuring	$	1.2	$	2.1
Other
Pension settlement	1.0		1.0
Asset disposals	7.0		7.0
Acquisition and integration related costs	1.2		1.2
Total	$	10.4	$	11.3

2011 Manufacturing Redesign Restructuring Program

On January 13, 2011, the Board of Directors approved the 2011 manufacturing redesign restructuring program of up to $55 million to rationalize certain product lines and discontinue tape coating operations at our Weatherford, Oklahoma facility by April 2011 and subsequently close the facility. We signed a strategic agreement with TDK Corporation to jointly develop and manufacture magnetic tape technologies. Under the agreement, we are collaborating on the research and development of future tape formats in both companies' research centers in the United States and Japan, while consolidating tape coating operations to the TDK Yamanashi manufacturing facility. This program includes a total of approximately $50 million in restructuring and other charges, consisting of severance and related costs of approximately $3 million, asset impairments of approximately $31 million primarily related to the Weatherford facility, inventory write-offs of approximately $14 million and other charges of approximately $2 million.

During the three months ended June 30, 2011 no additional costs were incurred related to this program. During the six months ended June 30, 2011 we recorded inventory write-offs of $1.0 million related to this program, which are included in cost of goods sold in our Condensed Consolidated Statements of Operations. Since the inception of this program, we have recorded a total of $15.2 million of inventory write-offs, $31.2 million of asset impairment charges and $3.2 million of severance and related expenses.

As of June 30, 2011, the Weatherford facility met the held for sale criteria outlined in the accounting guidance for the sale of a long-lived asset. Accordingly, the book value of the building and property, $3.0 million, was transferred into other current assets on the Condensed Consolidated Balance Sheet and is no longer being depreciated.

Changes in the 2011 manufacturing redesign restructuring program accruals were as follows:

(In millions)	Severance and Related			Lease Termination Costs		Other			Total
Accrued balance at December 31, 2010	$	3.2		$	—	$	—		$	3.2
Charges (1)	—			—		1.0			1.0
Usage (1)	(0.4		)	—		(1.0		)	(1.4		)
Currency impacts	—			—		—			—
Accrued balance at March 31, 2011	$	2.8		$	—	$	—		$	2.8
Charges	—			—		—			—
Usage	(2.3		)	—		—			(2.3		)
Currency Impacts	—			—		—			—
Accrued balance at June 30, 2011	$	0.5		$	—	$	—		$	0.5

(1) Other includes inventory write-offs of $1.0 million.

We expect the majority of the severance and related portion of this liability to be paid out during 2011.

2011 Corporate Strategy Restructuring Program

On January 31, 2011, the Board of Directors approved the 2011 corporate strategy restructuring program to rationalize certain product lines, increase efficiency and gain greater focus in support of our go-forward strategy. Major components of the program include charges associated with certain benefit plans, improvements to our global sourcing and distribution network, costs associated with further rationalization of our product lines and evolution of our skill sets to align with our announced strategy. This program includes a total of approximately $35 million in restructuring and other charges, consisting of severance and related expenses of approximately $14 million, charges associated with certain benefit plans of approximately $11 million, lease termination expenses of approximately $5 million and other charges of approximately $5 million.

 During the three months ended June 30, 2011 we recorded a restructuring charge of $1.2 million as part of this program, which included $0.7 million for severance and related expenses, $0.2 million for lease termination costs and $0.3 million of other charges. These costs were included in restructuring and other on our Condensed Consolidated Statements of Operations. In addition, we also recorded inventory write-offs of $0.3 million related to the planned rationalization of certain product lines as part of this program, which are included in cost of goods sold in our Condensed Consolidated Statements of Operations.

During the six months ended June 30, 2011 we recorded restructuring charges of $2.1 million as part of this program, which included $1.3 million for severance and related expenses, $0.4 million for lease termination costs and $0.4 million of other charges. These costs were included in restructuring and other on our Condensed Consolidated Statements of Operations. In addition, we also recorded inventory write-offs of $0.5 million related to the planned rationalization of certain product lines as part of this program, which are included in cost of goods sold in our Condensed Consolidated Statements of Operations. Since the inception of this program, we have recorded a total of $4.7 million of severance and related expenses, $0.5 million of inventory write-offs, $0.4 million of other charges, $0.4 million of lease termination costs and $0.3 million related to a pension curtailment charge.

Changes in the 2011 corporate strategy restructuring program accruals were as follows:

(In millions)	Severance and Related			Lease Termination Costs			Other			Total
Accrued balance at December 31, 2010	$	3.4		$	—		$	—		$	3.4
Charges (1)	0.6			0.2			0.3			1.1
Usage (1)	(1.0		)	(0.2		)	(0.4		)	(1.6		)
Currency impacts	0.2			—			0.2			0.4
Accrued balance at March 31, 2011	$	3.2		$	—		$	0.1		$	3.3
Charges (1)	0.7			0.2			0.6			1.5
Usage (1)	(1.4		)	(0.2		)	(0.6		)	(2.2		)
Currency impacts	—			—			—			—
Accrued balance at June 30, 2011	$	2.5		$	—		$	0.1		$	2.6

(1) Other includes inventory write-offs of $0.2 million and $0.3 million for the three months ended March 31, 2011 and June 30, 2011, respectively.

We expect the majority of the severance and related portion of this liability to be paid out during 2011.

Other

Our Camarillo, California manufacturing facility ceased operations on December 31, 2008 and the facility, comprised of a building and property, was classified as held for sale. In an effort to increase the salability of the property, during the three months ended June 30, 2011, we demolished the building resulting in a $7.0 million loss on disposal during the period. The land related to the facility continues to meet the criteria for held for sale accounting and, therefore, remains classified in other current assets on the Condensed Consolidated Balance Sheet as of June 30, 2011.

We recorded $1.2 million of acquisition and integration related costs as a result of our acquisition activities during the three months ended June 30, 2011 within restructuring and other expense in the Condensed Consolidated Statements of Operations.

We recorded a pension settlement loss of $1.0 million during the three months ended June 30, 2011 within restructuring and other expense in the Condensed Consolidated Statements of Operations as a result of the downsizing associated with our domestic restructuring activities. See Note 9 herein for further information regarding the pension settlement.

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Basis of Presentation

6 Months Ended

Jun. 30, 2011

Basis of Presentation [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Basis of Presentation

The interim Condensed Consolidated Financial Statements of Imation Corp. (Imation, the Company, we, us or our) are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair statement of financial position, results of operations and cash flows for the periods presented. Except as otherwise disclosed herein, these adjustments consist of normal, recurring items. The results of operations for any interim period are not necessarily indicative of full year results. The Condensed Consolidated Financial Statements and Notes are presented in accordance with the requirements for Quarterly Reports on Form 10-Q and do not contain certain information included in our annual Consolidated Financial Statements and Notes.

The preparation of the interim Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses for the reporting periods. Despite our intention to establish accurate estimates and use reasonable assumptions, actual results may differ from our estimates.

The December 31, 2010 Condensed Consolidated Balance Sheet data was derived from the audited Consolidated Financial Statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. This Form 10-Q should be read in conjunction with our Consolidated Financial Statements and Notes included in our Annual Report on Form 10-K for the year ended December 31, 2010.

As a result of the wind down of our Global Data Media (GDM) business joint venture, those operations are presented in our historical Condensed Consolidated Financial Statements as discontinued operations for all periods presented.

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Earnings (Loss) per Common Share

6 Months Ended

Jun. 30, 2011

Earnings (Loss) per Common Share [Abstract]

Earnings Per Share [Text Block]

Earnings (Loss) per Common Share

Basic earnings per share is calculated using the weighted average number of shares outstanding for the period. Diluted earnings per share is computed on the basis of the weighted average basic shares outstanding plus the dilutive effect of our stock-based compensation plans using the “treasury stock” method. Unvested restricted stock and treasury shares are excluded from the calculation of weighted average number of common shares outstanding because they do not participate in dividends. Once restricted stock vests, it is included in our common shares outstanding.

The following table sets forth the computation of the weighted average basic and diluted income (loss) per share:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2011			2010			2011			2010
Numerator:
Loss from continuing operations	$	(12.5	)	$	(15.7	)	(19.7		)	(18.2		)
(Loss) income from discontinued operations	—			—			—			(0.1		)
Net loss	$	(12.5	)	$	(15.7	)	$	(19.7	)	$	(18.3	)
Denominator:
Weighted average number of common shares outstanding during the period	37.8			37.8			37.9			37.7
Dilutive effect of stock-based compensation plans	—			—			—			—
Weighted average number of diluted shares outstanding during the period	37.8			37.8			37.9			37.7
Basic (loss) earnings per common share:
Continuing operations	$	(0.33	)	$	(0.42	)	$	(0.52	)	$	(0.48	)
Discontinued operations	—			—			—			—
Net loss	(0.33		)	(0.42		)	(0.52		)	(0.49		)
Diluted (loss) earnings per common share:
Continuing operations	$	(0.33	)	$	(0.42	)	$	(0.52	)	$	(0.48	)
Discontinued operations	—			—			—			—
Net loss	(0.33		)	(0.42		)	(0.52		)	(0.49		)
Anti-dilutive options excluded from calculation	5.3			4.4			4.4			4.9

Earnings per share amounts for continuing operations, discontinued operations and net loss, as presented on the Condensed Consolidated Statements of Operations, are calculated individually and may not sum due to rounding differences.

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Shareholders' Equity

6 Months Ended

Jun. 30, 2011

Shareholders' Equity [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Shareholders' Equity

Treasury Stock

On January 28, 2008, our Board of Directors authorized the repurchase of a total of 3.0 million shares. Since the inception of this authorization we have repurchased 1.4 million shares of common stock and as of June 30, 2011 we have remaining authorization to repurchase up to 1.6 million shares. The treasury stock held as of June 30, 2011 was acquired at an average price of $24.66 per share.

Following is a summary of treasury share activity:

	Treasury Shares
Balance as of December 31, 2010	4,212,285
Purchases	686,159
Exercise of stock options	(45,429	)
Restricted stock grants and other	(257,455	)
401(k) matching contribution	(121,079	)
Balance as of June 30, 2011	4,474,481

Comprehensive Income (Loss)

Accumulated other comprehensive loss consisted of the following:

	June 30,			December 31,
(In millions)	2011			2010
Cumulative currency translation adjustment	$	(36.4	)	$	(47.4	)
Pension adjustments, net of income tax	(13.1		)	(14.2		)
Cash flow hedging and other, net of income tax	(0.8		)	0.9
Total accumulated other comprehensive loss	$	(50.3	)	$	(60.7	)

Comprehensive loss consisted of the following:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2011			2010			2011			2010
Net loss	$	(12.5	)	$	(15.7	)	$	(19.7	)	$	(18.3	)
Cumulative currency translation adjustment	5.4			(10.4		)	11.0			(15.2		)
Pension adjustments, net of income taxes	1.0			0.1			1.1			0.2
Cash flow hedging and other, net of income tax	(1.0		)	0.3			(1.7		)	0.5
Total comprehensive loss	$	(7.1	)	$	(25.7	)	$	(9.3	)	$	(32.8	)

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Condensed Consolidated Statements of Operations (USD $) In Millions, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Net revenue	$ 323.0	$ 354.4	$ 639.5	$ 720.2
Cost of goods sold	269.0	295.9	531.5	600.0
Gross profit	54.0	58.5	108.0	120.2
Operating expenses:
Selling, general and administrative	47.9	51.5	98.1	104.6
Research and development	5.0	3.9	9.7	8.3
Goodwill impairment	0	23.5	1.6	23.5
Restructuring and other	10.4	3.4	11.3	7.4
Total	63.3	82.3	120.7	143.8
Operating (loss) income	(9.3)	(23.8)	(12.7)	(23.6)
Other (income) and expense:
Interest income	(0.2)	(0.2)	(0.4)	(0.4)
Interest expense	1.0	1.0	1.9	2.1
Other, net	1.7	2.1	3.1	5.0
Total	2.5	2.9	4.6	6.7
Loss before income taxes	(11.8)	(26.7)	(17.3)	(30.3)
Income tax provision (benefit)	0.7	(11.0)	2.4	(12.1)
Loss from continuing operations	(12.5)	(15.7)	(19.7)	(18.2)
Discontinued operations:
Loss from discontinued operations, net of income taxes	0	0	0	(0.1)
Net loss	$ (12.5)	$ (15.7)	$ (19.7)	$ (18.3)
(Loss) earnings per common share — basic:
Continuing operations	$ (0.33)	$ (0.42)	$ (0.52)	$ (0.48)
Discontinued operations	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Net loss	$ (0.33)	$ (0.42)	$ (0.52)	$ (0.49)
(Loss) earnings per common share — diluted:
Continuing operations	$ (0.33)	$ (0.42)	$ (0.52)	$ (0.48)
Discontinued operations	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Net loss	$ (0.33)	$ (0.42)	$ (0.52)	$ (0.49)
Weighted average shares outstanding
Basic	37.8	37.8	37.9	37.7
Diluted	37.8	37.8	37.9	37.7