-----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, PVll5fhcFQYlsRiH1J3fDmCNmUk8/b8M+3XuR0Z5UEMJEteOfhL2zdGYf2+K52rd BJSDz+AUHArvg47FsEXZMQ== 0000950130-96-000515.txt : 19960216 0000950130-96-000515.hdr.sgml : 19960216 ACCESSION NUMBER: 0000950130-96-000515 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960102 FILED AS OF DATE: 19960214 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: 002-21726 FILM NUMBER: 96520527 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 January 2, 1996 [ ] 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 January 23, 1996, 8,877,157 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 January 2, 1996 and March 31, 1995 3 Consolidated Statements of Income (unaudited) for the three and nine months ended January 2, 1996 and January 3, 1995 4 Consolidated Statements of Cash Flows (unaudited) for the nine months ended January 2, 1996 and January 3, 1995 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11 EXHIBIT INDEX 12 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JANUARY 2, MARCH 31, 1996 1995 ---------------- ----------------- (IN THOUSANDS, EXCEPT SHARE AND ASSETS PER SHARE AMOUNTS) - ---------------- Current assets: Cash and cash equivalents $ 735 $ 3,559 Securities held to maturity --- 3,468 Trade receivables 15,040 11,902 Inventories: Raw materials 10,246 8,581 Work in process 3,439 3,802 Finished goods 4,487 3,224 -------- ------- Total inventories 18,172 15,607 -------- ------- Prepaid expenses 822 818 Deferred income taxes 1,667 1,557 -------- ------- Total current assets 36,436 36,911 -------- ------- Property, plant and equipment, at cost: Land 1,163 619 Building and improvements 10,889 10,444 Equipment 63,604 57,636 Construction in progress 13,289 6,388 -------- ------- 88,945 75,087 Less accumulated depreciation 20,371 16,323 -------- ------- Net property, plant and equipment 68,574 58,764 -------- ------- Other assets 7,014 2,269 -------- ------- $112,024 $97,944 ======== ======= LIABILITIES AND STOCKHOLDERS' EQUITY - ---------------------------------------------------------------- Current liabilities: Note payable 10,000 --- Current installments of long-term debt 1,674 1,697 Trade accounts payable 6,078 8,011 Accrued compensation and benefits 764 1,085 Payable to Fujicopian Co., Ltd., a related party 2,999 1,853 Other accrued liabilities 1,309 1,467 Income taxes payable 215 1,285 -------- ------- Total current liabilities 23,039 15,398 Long-term debt, excluding current installments 2,539 3,940 Deferred income taxes 5,819 4,917 -------- ------- Total liabilities 31,397 24,255 -------- ------- Stockholders' equity: Preferred stock; $.01 par value; 5,000,000 shares authorized; none issued --- --- Common stock; $.01 par value; 30,000,000 shares authorized; 8,877,157 and 8,731,479 shares issued as of January 2, 1996 and March 31, 1995, respectively 90 87 Additional paid-in capital 53,294 53,906 Unearned compensation - restricted stock award (763) (915) Notes receivable from exercise of stock options and warrants (1,394) (1,880) Retained earnings 29,400 22,491 -------- ------- Total stockholders' equity $ 80,627 $73,689 -------- ------- $112,024 $97,944 ======== =======
See accompanying notes to consolidated financial statements 3 INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED -------------------------- -------------------------- JANUARY 2, JANUARY 3, JANUARY 2, JANUARY 3, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ (IN THOUSANDS, EXCEPT PER (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) SHARE AMOUNTS) Revenues $24,018 $21,941 $64,242 $63,166 Cost of goods sold 16,712 15,340 45,310 44,477 ------- ------- ------- ------- Gross profit 7,306 6,601 18,932 18,689 ------- ------- ------- ------- Operating expenses: Research and development 829 569 2,375 1,613 Selling 1,096 864 2,965 2,709 General and administrative 895 1,004 2,744 2,770 ------- ------- ------- ------- Total operating expenses 2,820 2,437 8,084 7,092 ------- ------- ------- ------- Operating income 4,486 4,164 10,848 11,597 Other expense 7 (80) 48 (67) ------- ------- ------- ------- Income before income taxes 4,479 4,244 10,800 11,664 Income taxes 1,614 1,613 3,891 4,432 ------- ------- ------- ------- Net income $ 2,865 $ 2,631 $ 6,909 $ 7,232 ======= ======= ======= ======= Net income per share of common stock $ 0.31 $ 0.29 $ 0.74 $ 0.80 ======= ======= ======= ======= Weighted average common shares outstanding 9,363 9,150 9,339 9,037 ======= ======= ======= =======
See accompanying notes to consolidated financial statements 4 INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED ------------------------ JANUARY 2, JANUARY 3, 1996 1995 ----------- ----------- (IN THOUSANDS) Cash flows from operating activities: Net income $ 6,909 $ 7,232 -------- -------- Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 4,466 3,268 Deferred income taxes 1,571 1,799 Other noncash provisions 220 235 Reduction in income tax payable from the exercise of options and warrants 1,314 982 Cash provided (used) by changes in: Trade receivables (3,148) (864) Inventories (2,565) (1,289) Prepaid expenses (4) (250) Other assets 38 (21) Trade accounts payable (2,143) 363 Accrued compensation and benefits (321) 747 Payable to Fujicopian Co., Ltd. 1,198 2,284 Other accrued liabilities (158) 592 Income taxes payable (1,070) 1,148 -------- -------- Total adjustments (602) 8,994 -------- -------- Net cash provided by operating activities 6,307 16,226 -------- -------- Cash flows used in investing activities: Capital expenditures (13,789) (10,967) Payments to acquire other assets (5,575) --- Purchases of securities --- (3,415) Maturities of securities 3,468 --- -------- -------- Net cash used in investing activities (15,896) (14,382) -------- -------- Cash flows from financing activities: Proceeds from sale of common stock 80 83 Exercise of stock options and warrants: Proceeds 408 799 Notes received from officers (2,299) (466) Proceeds from note payable 10,000 --- Repayments of long-term debt (1,424) (1,429) -------- -------- Net cash provided (used) by financing activities 6,765 (1,013) -------- -------- Net increase (decrease) in cash and cash equivalents (2,824) 831 Cash and cash equivalents at beginning of period 3,559 4,989 -------- -------- Cash and cash equivalents at end of period $ 735 $ 5,820 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest, net of amount capitalized 117 219 Income taxes $ 2,076 $ 130 ======== ======== Supplemental disclosure of noncash investing and financing activities: Increase (decrease) in liabilities incurred in connection with capital expenditures 158 (420) Notes received from exercise of stock options and warrants 548 1,264 Common stock surrendered for repayment of notes receivable 3,796 --- Issuance of restricted common stock $ 58 $ 292 ======== ========
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 January 2, 1996 and consolidated results of operations for the three and nine month periods ended January 2, 1996 and January 3, 1995 and consolidated cash flows for the nine month periods ended January 2, 1996 and January 3, 1995. Consolidated results of operations for the three and nine month periods ended January 2, 1996 are not necessarily indicative of results to be expected for the full year ending March 31, 1996. (2) FOREIGN EXCHANGE The Company periodically enters into forward foreign exchange contracts to minimize exposure and reduce risk from exchange rate fluctuations in the regular course of business. Since these contracts hedge exposures on firm foreign currency commitments, gains and losses are deferred and recognized as adjustments to the costs of the corresponding assets. Certain commitments to purchase materials were hedged with forward foreign exchange contracts maturing in January 1996 to purchase 15,000,000 Japanese yen for $149,000. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- COMPARISON OF THE QUARTER ENDED JANUARY 2, 1996 WITH THE QUARTER ENDED JANUARY 3, 1995 Revenues in the three months ended January 2, 1996 were $24.0 million, an increase of 9.5% from $21.9 million in the three months ended January 3, 1995. Included in the three months ended January 3, 1995 revenues were $1.5 million, or 6.9% of revenues, that did not recur in the three months ended January 2, 1996. The majority of this non-recurring revenue consisted of sales to Armor, Fujicopian's thermal transfer licensee for Europe, to assist them when their orders exceeded their manufacturing capacity. Recurring bar code ribbon revenues in the three months ended January 2, 1996 were $14.1 million, comprised 58.5% of total revenues, and increased 8.1% from $13.0 million in the three months ended January 3, 1995. The Company sells its bar code ribbons principally to printer original equipment manufacturers (OEM's), which in turn sell the ribbons to end users, either directly or through distributors and value-added resellers. Bar code ribbon revenues from this OEM channel were comparable to the three months ended January 3, 1995. The Company also sells bar code ribbons directly to distributors and dealers when such sales do not adversely affect the Company's OEM customers. Bar code ribbon revenues from this alternative channel increased 30.5% in the three months ended January 2, 1996, reflecting the addition of several new customers and the success of a lower cost product line introduced early in fiscal 1996. Color supplies revenues in the three months ended January 2, 1996 were $8.5 million, comprised 35.5% of total revenues, and increased 37.2% from $6.2 million in the three months ended January 3, 1995. The Company sells color ribbons principally to printer OEM's who resell them through their own distribution channels. Beginning this quarter, however, with the acquisition of the thermal transfer supplies business from one of the Company's customers, QMS, Inc., the Company sells supplies for QMS printers directly to distributors and end-users. The color supplies revenue increase is primarily due to shipments under a very significant color ribbon program which is being transferred from the Company's licensor, Fujicopian, in addition to the incremental revenue from the sale of supplies for QMS printers. Other ribbon revenues in the three months ended January 2, 1996 were $1.4 million, comprised 5.8% of total revenues, and increased 14.6% from $1.2 million in the three months ended January 3, 1995. This increase resulted from higher sales of MICR (magnetic ink character recognition) ribbons. Gross margins were 30.4% of revenues in the three months ended January 2, 1996 as compared to 30.1% in the three months ended January 3, 1995. This increase resulted from the leverage of higher revenues against fixed expenses, an improvement in sales mix and savings from the self-insurance of workers compensation benefits, partially offset by expenses from the QMS business acquisition and higher depreciation expense. Total operating expenses were $2.8 million in the three months ended January 2, 1996, an increase of 15.7% from $2.4 million in the three months ended January 3, 1995. An increase in research and development staffing as well as telemarketing and administrative expenses from the QMS thermal transfer supplies business were primarily responsible for this increase. Income taxes in the three months ended January 2, 1996 were $1.6 million or 36% of income before income taxes. In the three months ended January 3, 1995, income taxes were $1.6 million or 38% of income before income taxes. This rate reduction was due primarily to a state alternative minimum tax rate reduction and the Company's foreign sales corporation incorporated in fiscal 1996. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED RESULTS OF OPERATIONS - --------------------- COMPARISON OF THE NINE MONTHS ENDED JANUARY 2, 1996 WITH THE NINE MONTHS ENDED JANUARY 3, 1995. Revenues in the nine months ended January 2, 1996 were $64.2 million, an increase of 1.7% from $63.2 million in the nine months ended January 3, 1995. Included in the nine months ended January 3, 1995 revenues were $4.4 million or 6.9% of revenues, that did not recur in the nine months ended January 2, 1996. The majority of this non-recurring revenue consisted of sales to Armor. The Company expects that continuing growth of its recurring revenue base will more than offset the loss of this non-recurring revenue for fiscal 1996. Recurring bar code ribbon revenues in the nine months ended January 2, 1996 were $39.0 million, comprised 60.6% of total revenues, and increased 6.8% from $36.5 million in the nine months ended January 3, 1995. Bar code ribbon revenues from the OEM channel increased 3.9%, principally due to the overall growth of applications for bar code tag and label printing, offset by reductions in inventory levels throughout the OEM channel made possible by the Company's reduced delivery times. Bar code ribbon revenues from the dealer distribution channel increased 14.3% in the nine months ended January 2, 1996, reflecting the addition of several new customers, the success of a lower cost product line introduced early in fiscal 1996 and the overall bar code ribbon aftermarket growth. Color supplies revenues in the nine months ended January 2, 1996 were $21.5 million, comprised 33.4% of total revenues, and increased 16.2% from $18.5 million in the nine months ended January 3, 1995. The color supplies revenue increase is principally due to shipments under a very significant color ribbon program which is being transferred from Fujicopian. Other ribbon revenues in the nine months ended January 2, 1996 were $3.7 million, comprised 5.8% of total revenues, and decreased 2.5% from $3.8 million in the nine months ended January 3, 1995. This decrease resulted from lower sales of facsimile ribbons, partially offset by higher sales of MICR ribbons. Gross margins were 29.5% of revenues in the nine months ended January 2, 1996 as compared to 29.6% in the nine months ended January 3, 1995. This decline primarily resulted from high depreciation expense, higher purchase prices and expense from the QMS business acquisition, partially offset by the benefit from higher revenues absorbing fixed expenses, an improvement in sales mix and savings from the self-insurance of workers compensation expenses. Total operating expenses were $8.1 million in the nine months ended January 2, 1996, an increase of 14.0% from $7.1 million in the nine months ended January 3, 1995. An increase in research and development staffing and sampling of new products to customers as well as expenses for the QMS thermal transfer supplies business were primarily responsible for this increase. Income taxes in the nine months ended January 2, 1996 were $3.9 million or 36.0% of income before income taxes. In the nine months ended January 3, 1995, income taxes were $4.4 million or 38% of income before income taxes. The rate reduction was primarily due to a state alternative minimum tax rate reduction and the Company's foreign sales corporation incorporated in fiscal 1996. The actual tax payments in the nine months ended January 2, 1996 were lower than the tax expense reflected in the Company's statements of income due to tax deductions from the exercise of non-qualified stock options and compensatory warrants. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company's financial condition is strong, with long-term debt comprising only 3.1% of total capitalization at January 2, 1996. During the nine months ended January 2, 1996, $13.8 million of capital expenditures, $5.6 million to acquire QMS, Inc.'s thermal transfer supplies business, $2.3 million loaned to officers for their income taxes due upon the exercise of non-qualified stock options and $1.4 million in scheduled 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED debt repayments were funded by $6.3 million of cash and short-term investments, $10.0 million borrowed under the Company's lines of credit and $6.3 million of cash provided by operating activities. The Company received a $5.8 million tax deduction from the nonqualified stock option exercises, the benefit of which is treated as additional paid-in capital for financial statement purposes. The Company expects to spend approximately $5 million on capital expenditures during the remainder of fiscal 1996, including the construction of a separate 100,000 square-foot manufacturing facility. The Company had available borrowing capacity under lines of credit with two banks of $20.0 million at January 2, 1996. The Company believes that its current cash balance and internally generated cash, supplemented as needed by its lines of credit, will be sufficient to fund its working capital, capital expenditure and debt service requirements for at least the next two years. 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits 10.1 Demand Note, dated January 15, 1996, between Donald D. Lennox and the Registrant. 11 Statement re: Calculation of Net Income Per Share of Common Stock. 27 Financial Data Schedule. (b) No reports on Form 8-K were filed during the quarter ended January 2, 1996. 10 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: 2/9/96 /s/ JOHN W. O'LEARY --------- ----------------------- John W. O'Leary President and Chief Executive Officer Date: 2/9/96 /s/ MICHAEL J. DRENNAN --------- ------------------------ Michael J. Drennan Vice President - Finance, Treasurer, Secretary and Chief Financial Officer 11 EXHIBIT INDEX Exhibit Number Description Page -------------- ----------- ---- 10.1 Demand Note, dated January 15, 1996, between 13 Donald D. Lennox and the Registrant. 11 Calculation of Net Income per Share of Common 14 Stock 27 Financial Data Schedule 15 EX-10.1 2 DEMAND NOTE EXHIBIT 10.1 DEMAND NOTE ----------- $240,000.00 AMHERST, NEW YORK - ----------- JANUARY 15, 1996 FOR VALUE RECEIVED, the undersigned promises to pay to the order of INTERNATIONAL IMAGING MATERIALS, INC. ("IIMAK") at its offices at 310 Commerce Drive, Amherst, New York 14228, the sum of two hundred forty thousand and 00/100 dollars ($240,000.00), payable on demand. This Note shall not bear interest until maturity. After maturity (whether on acceleration or otherwise), this Note shall bear interest on the unpaid principal balance at a rate of twelve percent (12%) per annum. Interest shall be calculated on the basis of one three hundred sixty-fifth (1/365th) of the above specified rate in effect for each calendar day such principal balance is unpaid. This Note shall be immediately due and payable upon the termination of the undersigned's directorship with IIMAK for any reason. The holder of the Note has full recourse against all of the undersigned's assets for collection of the unpaid principal balance on the Note. The undersigned shall have the right to prepay at any time without premium or penalty, any or all of the principal indebtedness under this Note. Any holder of the Note may declare all indebtedness evidenced by this Note to be immediately due and payable upon: (1) the filing by or against the undersigned of a request or petition for reorganization, arrangement, adjustment of debts, adjudication as a bankrupt, relief as a debtor or other relief under the bankruptcy, insolvency or similar laws of the Untied States or any state or territory thereof or any foreign jurisdiction, now or hereafter in effect; or (2) the making of any general assignment by the undersigned for the benefit of creditors. No failure by the holder of this Note to exercise, and no delay in exercising, any right or power hereunder shall operate as waiver thereof, nor shall any single or partial exercise by such holder of any right or power hereunder preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the holder hereof as herein specified are cumulative and not exclusive of any other rights or remedies which such holder may otherwise have. No modification, rescission, waiver, forbearance, release of amendment of any provisions of this Note shall be made, except by a written agreement duly executed by the undersigned and the holder hereof. The undersigned hereby waives diligence, presentment, protest and demand, and also notice of protest, demand, dishonor and nonpayment of this Note. The Note shall be governed by the laws of the State of New York. The undersigned agrees to pay all costs and expenses incurred by the holder hereof in enforcing this Note, including, without limitation, actual attorneys' fees. January 15, 1996 Donald D. Lennox --------------------- ----------------------------------- Date Name 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 ---------------------------- January 2, January 3, 1996 1995 ------------ ------------ (Unaudited) Net income $2,865 $2,631 ------ ------ Weighted average common shares 8,827 8,355 outstanding Common stock equivalents for restricted stock, stock options and warrants 536 795 ------ ------ Weighted average common shares outstanding as adjusted 9,363 9,150 ------ ------ Net income per share of common stock $ .31 $ .29 ====== ======
EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS MAR-31-1996 APR-01-1995 JAN-02-1996 735 0 15,040 0 18,172 36,436 88,945 20,371 112,024 23,039 2,539 90 0 0 80,537 112,024 64,242 64,242 45,310 45,310 8,084 0 48 10,800 3,891 6,909 0 0 0 6,909 .74 .74
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