-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CYJGB1ERJZN5+upILg5lX7m7QGm0TWnG4GsFgzxsKOi5IQpvTU9TFT7AsLbM5Sam Z2WYMteLyEDwVVwTaxRRyQ== 0000950130-97-003675.txt : 19970815 0000950130-97-003675.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950130-97-003675 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970701 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL IMAGING MATERIALS INC /DE/ CENTRAL INDEX KEY: 0000904009 STANDARD INDUSTRIAL CLASSIFICATION: PENS, PENCILS & OTHER ARTISTS' MATERIALS [3950] IRS NUMBER: 133179629 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21726 FILM NUMBER: 97660857 BUSINESS ADDRESS: STREET 1: 310 COMMERCE DR CITY: AMHERST STATE: NY ZIP: 14228 BUSINESS PHONE: 7166916333 MAIL ADDRESS: STREET 1: 310 COMMERCE DRIVE CITY: AMHERST STATE: NY ZIP: 14228 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [MARK ONE] [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 1, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to __________ ------------------------ Commission File No. 0-21726 INTERNATIONAL IMAGING MATERIALS, INC. ------------------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 13-3179629 -------- ---------- (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 310 Commerce Drive, Amherst, New York 14228 ------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (716) 691-6333 -------------- (Registrant's Telephone Number, Including Area Code) 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 Yes X No ________________ At August 4, 1997, 8,363,086 shares of Common Stock of the Registrant were outstanding. INTERNATIONAL IMAGING MATERIALS, INC. INDEX TO FORM 10-Q PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets (unaudited) as of July 1, 1997 and March 31, 1997 3 Consolidated Statements of Income (unaudited) for the three months ended July 1, 1997 and July 2, 1996 4 Consolidated Statements of Cash Flows (unaudited) for the three months ended July 1, 1997 and July 2, 1996 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 9 SIGNATURES 10 EXHIBIT INDEX 11 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JULY 1, MARCH 31, 1997 1997 --------------- ----------------- (IN THOUSANDS, EXCEPT SHARE AND ASSETS PER SHARE AMOUNTS) ------ Current assets: Cash $ 11 $ 444 Trade receivables 17,000 17,726 Inventories: Raw materials 6,197 5,789 Work in process 4,808 4,602 Finished goods 5,713 5,478 -------- -------- Total inventories 16,718 15,869 -------- -------- Prepaid expenses 1,507 1,107 Deferred income taxes 1,500 1,176 -------- -------- Total current assets 36,736 36,322 -------- -------- Property, plant and equipment, at cost: Land 1,170 1,170 Buildings and improvements 21,268 21,265 Equipment 83,661 82,702 Construction in progress 1,140 814 -------- -------- 107,239 105,951 Less accumulated depreciation 30,095 28,320 -------- -------- Net property, plant and equipment 77,144 77,631 -------- -------- Other assets 4,862 4,521 -------- -------- $118,742 $118,474 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Notes payable to banks 15,000 8,484 Current installments of long-term debt 1,095 1,143 Trade accounts payable 4,586 7,858 Other accrued liabilities 4,350 3,622 -------- -------- Total current liabilities 25,031 21,107 Long-term debt, excluding current installments 744 1,111 Deferred income taxes 9,496 8,388 -------- -------- Total liabilities 35,271 30,606 -------- -------- Stockholders' equity: Preferred stock; $.01 par value; 5,000,000 shares authorized; none issued --- --- Common stock; $.01 par value; 30,000,000 shares authorized; 8,311,486 and 8,570,310 shares issued as of July 1, 1997 and March 31, 1997, respectively 83 86 Additional paid-in capital 38,649 44,514 Unearned compensation - restricted stock award (319) (385) Notes receivable from exercise of stock options and warrants (847) (37) Retained earnings 45,905 43,690 -------- -------- Total stockholders' equity 83,471 87,868 -------- -------- $118,742 $118,474 ======== ========
See accompanying notes to consolidated financial statements 3 INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED -------------------------- JULY 1, JULY 2, 1997 1996 ------ ------ (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues $26,765 $25,003 Cost of goods sold 19,221 17,479 ------- ------- Gross profit 7,544 7,524 ------- ------- Operating expenses: Research and development 1,168 848 Selling 1,595 1,136 General and administrative 1,177 1,055 ------- ------- Total operating expenses 3,940 3,039 ------- ------- Operating income 3,604 4,485 Other expense 298 130 ------- ------- Income before income taxes 3,306 4,355 Income taxes 1,091 1,524 ------- ------- Net income $ 2,215 $ 2,831 ======= ======= Net income per share of common stock $0.27 $0.32 ======= ======= Weighted average common shares outstanding 8,346 8,942 ======= =======
See accompanying notes to consolidated financial statements 4 INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED ------------------- JULY 1, JULY 2, 1997 1996 ------ ------- IN THOUSANDS) Cash flows from operating activities: Net income $ 2,215 $ 2,831 ------- ------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,209 1,881 Deferred income taxes and other non cash expenses 329 723 Reduction in income tax payable from the exercise of option 1,072 393 Cash provided (used) by changes in: Trade receivables 766 2,322 Inventories (849) 2,253 Prepaid expenses (400) (189) Other assets 116 (303) Trade accounts payable (2,532) (2,846) Other accrued liabilities 728 1,405 ------- ------- Total adjustments 1,439 5,639 ------- ------- Net cash provided by operating activities 3,654 8,470 ------- ------- Cash flows used in investing activities: Capital expenditures (2,097) (7,670) ------- ------- Cash flows from financing activities: Proceeds from employee stock purchase plan 21 24 Purchase of common stock (7,290) --- Exercise of stock options and warrants: Proceeds --- 545 Notes received for related tax liabilities (822) (1,149) Proceeds from note payable to banks, net 6,516 105 Repayments of long-term debt (415) (560) ------- ------- Net cash used in financing activities (1,990) (1,035) ------- ------- Net decrease in cash (433) (235) Cash at beginning of quarter 444 570 ------- ------- Cash at end of quarter $ 11 $ 335 ======= ======= Supplemental disclosure of cash flow information: Cash paid during the period for: Interest, net of amount capitalized 318 102 Income taxes $ 46 $ 31 ======= ======= Supplemental disclosure of noncash investing and financing activities: Decrease in liabilities for capital expenditures (740) (2,080) Notes received from exercise of stock options and warrants 810 --- Common stock surrendered for payment of stock option exercise price $ --- $ 240 ======= =======
See accompanying notes to consolidated financial statements 5 INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) ADJUSTMENTS In the opinion of the Company's management, the accompanying unaudited consolidated financial statements contain all normal recurring adjustments necessary for a fair presentation of the Company's consolidated financial position as of July 1, 1997 and consolidated results of operations for the three month period ended July 1, 1997 and July 2, 1996 and consolidated cash flows for the three month period ended July 1, 1997 and July 2, 1996. Consolidated results of operations for the three month period ended July 1, 1997 are not necessarily indicative of results to be expected for the full year ending March 31, 1998. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- On July 15, 1997, the Company, PAXAR Corporation and Ribbon Manufacturing, Inc. a wholly owned subsidiary of PAXAR Corporation, entered into an Agreement and Plan of Merger, upon and subject to the terms and conditions of which Ribbon Manufacturing, Inc. will be merged with and into the Company and the Company will become a wholly owned subsidiary of PAXAR Corporation. In the merger, each issued and outstanding share of the common stock of the Company will be converted into the right to receive between 1.2 and 1.412 shares of common stock of PAXAR Corporation. The following discussion and analysis reflects the Company's operations and prospects as a separate entity. COMPARISON OF THE QUARTER ENDED JULY 1, 1997 WITH THE QUARTER ENDED JULY 2, 1996 Revenues in the three months ended July 1, 1997 were $26.8 million, an increase of 7.0% from $25.0 million in the three months ended July 2, 1996. The Company sells its ribbons primarily to printer original equipment manufacturers, which in turn sell the ribbons under their own brand names to end-users, either directly or through distributors and value-added resellers. Revenues from OEM customers in the three months ended July 1, 1997 were $18.5 million, comprised 69.3% of total revenues, and increased 3.7% from $17.9 million in the three months ended July 2, 1996. This increase primarily reflects new product lines introduced by the Company to existing tag and label customers partially offset by a decline in sales to the Company's traditional color desktop ribbon customers in this channel. The Company also sells its ribbons directly to distributors and dealers where such sales do not adversely affect the Company's OEM customers. Revenues from domestic distributors in the three months ended July 1, 1997 were $7.1 million, comprised 26.5% of total revenues, and increased 12.4% from $6.3 million in the three months ended July 2, 1996. The addition of several new significant tag and label customers, new product lines introduced to existing tag and label customers, overall tag and label aftermarket growth and the continuing end-user migration towards this distributor channel from the OEM channel as the market for tag and label ribbons matures contributed to this growth. This growth was partially offset by a decline in sales to the Company's traditional color desktop ribbon customers in this channel. Revenues from international distributors in the three months ended July 1, 1997 were $1.1 million, comprised 4.2% of total revenues, and increased 38.7% from $813,000 in the three months ended July 2, 1996. The rapid expansion of the market for tag and label printing in Central and South America, and the Company's marketing programs targeting these opportunities, were primarily responsible for the sales increase. Gross margin was 28.2% of revenues in the three months ended July 1, 1997 as compared to 30.1% in the three months ended July 2, 1996. This decline primarily resulted from the incremental operating expenses from the new manufacturing facility opened during the three months ended July 2, 1996, a change in sales mix and lower overall selling prices, partially offset by the increased leverage of fixed overhead costs and production efficiencies from higher sales volumes, and lower raw material purchase prices. 7 Operating expenses were $3.9 million in the three months ended July 1, 1997, an increase of $901,000 from $3.0 million in the three months ended July 2, 1996. Research and development expense increased $320,000 due to increased staffing and sampling of new products as investments in future revenue growth. Selling expenses increased $459,000 due to the hiring of additional personnel and increased advertising and promotional activities to drive the Company's sales growth. Other expense was $298,000 in the three months ended July 1, 1997, an increase of $168,000 from $130,000 in the three months ended July 2, 1996. This increase reflects the expensing of current interest charges on the Company's lines of credit in the three months ended July 1, 1997. A portion of the interest charges incurred on the Company's lines of credit in the three months ended July 2, 1996 was capitalized as part of the cost of the construction of and equipment for the 100,000 square-foot manufacturing facility completed during that three month period. Income taxes in the three months ended July 1, 1997 were $1.1 million or 33.0% of income before income taxes. In the three months ended July 2, 1996, income taxes were $1.5 million or 35.0% of income before income taxes. Benefits from increasing sales through the Company's foreign sales corporation primarily contributed to the rate reduction. Weighted average common shares outstanding in the three months ended July 1, 1997 were 8.3 million shares, a decrease of 596,000 shares from 8.9 million shares in the three months ended July 2, 1996. This decrease primarily resulted from the repurchase of 551,000 shares on the open market during March and April 1997. Liquidity and Capital Resources - ------------------------------- The Company's financial condition remained strong, with long-term debt comprising less than 1% of total capitalization at July 1, 1997. During the three months ended July 1, 1997, $3.6 million of cash provided by operating activities was used to fund $2.1 million of capital expenditures. The Company borrowed $6.5 million under lines of credit in order to partially fund the $7.3 million repurchase of 420,800 common shares during the quarter. The Company also loaned officers $822,000 for their income taxes related primarily to the exercise of non-qualified stock options for which the Company will receive a tax deduction of $2.2 million. Trade accounts payable decreased $3.3 million in the three months ended July 1, 1997 due to payments for capital expenditures and the timing of vendor payments. The Company expects to spend approximately $5.0 million on capital expenditures during the remainder of fiscal 1998. The Company had available borrowing capacity under lines of credit with two banks of $25.0 million at July 1, 1997. The Company believes that internally generated cash will be more than sufficient to fund working capital, capital expenditures and debt service requirements and repay the balance on its lines of credit through the end of fiscal 1999. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable until after June 15, 1998. 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits 2.0 Agreement and Plan of Merger, dated as of July 15, 1997, among PAXAR Corporation, Ribbon Manufacturing, Inc. and International Imaging Materials, Inc. (incorporated by reference to exhibit 2 to the registrant's current report on Form 8-K, dated July 29, 1997). 10.1.2 Amendment, dated June 19, 1997, to License Agreement referenced in Exhibit 10.1 OF Form 10-Q dated October 1, 1996. 11 Statement re: Calculation of Net Income Per Share of Common Stock. 27 Financial Data Schedule (B) Reports on Form 8-K: Form 8-K reporting date was July 29, 1997. Items Reported: Item 1(b): Registrant submitted a copy of the Merger Agreement between International Imaging Materials, Inc., Paxar Corporation and Ribbon Manufacturing, Inc.. Item 7: Registrant submitted exhibits related to the merger of International Imaging Materials, Inc. and a wholly-owned subsidiary of PAXAR Corporation. 9 SIGNATURES ---------- 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. INTERNATIONAL IMAGING MATERIALS, INC. Date: 8/11/97 /s/ JOHN W. O'LEARY ------- ------------------- John W. O'Leary President and Chief Executive Officer Date: 8/11/97 /s/ MICHAEL J. DRENNAN ------- ------------------- Michael J. Drennan Vice President - Finance, Treasurer, Secretary and Chief Financial Officer 10 EXHIBIT INDEX Exhibit Number Description -------------- ------------ 2.0 Agreement and Plan of Merger, dated as of July 15, 1997, among PAXAR Corporation, Ribbon Manufacturing, Inc. and International Imaging Materials, Inc. (incorporated by reference to Exhibit 2 to the Registrant's current report on Form 8-K, dated July 29, 1997. 10.1.2 Amendment, dated June 19, 1997, to License Agreement referenced in Exhibit 10.1 of Form 10-Q dated October 1, 1996. 11 Calculation of Net Income per Share of Common Stock 27 Financial Data Schedule 11 EX-10.1.2 2 MEMO OF AGREEMENT REGARDING RIGHTS OF AN ACQUIRER Exhibit 10.1.2 MEMORANDUM OF AGREEMENT REGARDING RIGHTS OF AN ACQUIRER OF IIMAK THIS MEMORANDUM OF AGREEMENT is made as of June 19, 1997 by and between ---- FUJICOPIAN CO., LTD. (hereinafter referred to as "Fuji") and INTERNATIONAL IMAGING MATERIALS, INC. (hereinafter referred to as "IIMAK") with regard to that certain Agreement dated as of September 18, 1996 between Fuji and IIMAK (the "Agreement"). WITNESSETH: WHEREAS, IIMAK and Fuji wish to record a further understanding relating to the applicability of the Agreement in the event of acquisition, merger, or business combination between IIMAK and a third party or parties; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto for themselves and their respective successors and assigns do mutually agree as follows: 1. In the event that during the term of the Agreement IIMAK is acquired by, merged with, or enters into a business combination with another entity or otherwise becomes an affiliate of another entity (a "Transaction") which entity, prior to the Transaction, engages in the manufacture or distribution of (1) thermal carbon copy, (2) thermal carbon paper and thermal ribbon and/or (3) thermal color paper and thermal color ribbon (collectively, "thermal transfer products") or manufactures or distributes thermal transfer printers or similar devices, (1) IIMAK may conduct business with such entity after a Transaction to the same extent it may now conduct business with such entity and (2) the Agreement will not apply to any such entity or thermal transfer products manufactured or distributed by any such entity (i) to the extent that the respective rights and obligations of Fuji and IIMAK under the Agreement remain unaltered and IIMAK continues to perform its obligations under the Agreement, and (ii) except to the extent that such entity manufactures and distributes products utilizing Licensed Technology disclosed to such entity by IIMAK, such disclosure subject to the relevant provisions of the Agreement. 2. Terms defined in the Agreement shall have the same meaning herein as they are assigned in the Agreement. IN WITNESS WHEREOF, the parties have caused this Memorandum of Agreement to be duly executed by their duly authorized representatives as of the day and year first above written. FUJICOPIAN CO., LTD. By: /s/ Taro Akashiro ----------------------------- Taro Akashiro, President INTERNATIONAL IMAGING MATERIALS, INC. By: /s/ John W. O'Leary ------------------------------- John W. O'Leary, President and Chief Executive Officer EX-11 3 CALCULATION OF NET INCOME PER SHARE OF COMMON STOCK EXHIBIT 11. CALCULATION OF NET INCOME PER SHARE OF COMMON STOCK (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) THREE MONTHS ENDED ---------------------- JULY 1, JULY 2, 1997 1996 --------- --------- (UNAUDITED) NET INCOME $2,215 $2,831 --------- --------- Weighted average common shares outstanding 8,135 8,543 Common stock equivalents for restricted stock, stock options and warrants 211 399 --------- --------- Weighted average common shares outstanding as adjusted 8,346 8,942 --------- --------- Net income per share of common stock $ .27 $ .32 ========= ========= EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS MAR-31-1998 APR-01-1997 JUL-01-1997 11 0 17,000 0 16,718 36,736 107,239 30,095 118,742 25,031 1,839 0 0 83 83,388 118,742 26,765 26,765 19,221 19,221 3,940 0 298 3,306 1,091 2,215 0 0 0 2,215 .27 .27
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