-----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, HdboXcdKuQZg6C29JT3K8sxMahjxTum+s1ITO0lqaC+8BoId6PvKUU1OqSWZy3c9 XROpD12Tcj3f8klG76oEHQ== 0000950130-96-002318.txt : 19960624 0000950130-96-002318.hdr.sgml : 19960624 ACCESSION NUMBER: 0000950130-96-002318 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960621 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21726 FILM NUMBER: 96583997 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-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $.01 PER SHARE -------------------------------------- (TITLE OF CLASS) 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 ---------------- ---------------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of May 31, 1996, the aggregate market value of the registrant's Common Stock held by non-affiliates was $172,770,235. The closing price of the Common Stock on May 31, 1996 as reported on the Nasdaq National Market, was $23.375. At May 31, 1996, 8,660,366 shares of common stock of the Registrant were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Certain sections of the registrant's Annual Report to Stockholders for the fiscal year ended March 31, 1996 (the "Annual Report") are incorporated by reference into Part II of this report. Certain sections of the registrant's Proxy Statement for its Annual Meeting of Stockholders to be held on August 21, 1996 (the "Proxy Statement") are incorporated by reference into Part III of this report. PART I ITEM 1. BUSINESS THE COMPANY International Imaging Materials, Inc. (the "Company") is the largest manufacturer of thermal transfer ribbons in North America for numerous diverse applications. These thermal transfer ribbons are used in bar code printers to print single-color and full-color tags and labels for use in manufacturing and factory automation systems, shipping and distribution systems, retail price tag applications and medical applications. Other thermal transfer ribbons produced by the Company are used in full-color printers to print high quality color graphics for business presentations, engineering and scientific drawings, graphic arts prepress layouts, proofs and comps, signage and other full color imaging applications. The Company also manufactures MICR ribbons for thermal transfer proof encoders used to encode checks for processing through the United States banking system, as well as ribbons used in plain-paper thermal transfer facsimile machines. The Company has been manufacturing thermal transfer ribbons since 1984 under a license agreement with Fujicopian Co., Ltd. of Osaka, Japan, a recognized leader in thermal transfer ribbon technology. Under the license agreement, the Company has the exclusive right (with certain exceptions) to manufacture in North America color thermal transfer ribbons covered by Fujicopian Co. Ltd.'s patents. As a result of the Company's operating experience and long-standing relationship with Fujicopian Co., Ltd., the Company has been able to develop significant proprietary product and manufacturing know- how relating to thermal transfer ribbons. Effective March 31, 1994, the Company adopted a formal plan to discontinue the operation of its software division. Discontinuation of this line of business, which developed an easy-to-use color presentation software package, resulted in an after-tax loss of $432,000 in fiscal 1994. Originally incorporated in New York in 1983, the Company was reorganized as a Delaware corporation in 1985. The principal executive offices of the Company are located at 310 Commerce Drive, Amherst, New York 14228 and its telephone number is (716) 691- 6333. PRODUCTS The Company's thermal transfer ribbons are an essential consumable in the thermal transfer printing process. In such a printing process, the image to be printed is transferred from the printer to the receptor material (generally paper, overhead transparency film or tag or label stock) through the application of an electronically heated printhead to a thermal transfer ribbon which releases ink onto the receptor. A basic thermal transfer ribbon is comprised of an ink coating on a film substrate. Single-color thermal transfer ribbons, typically used in bar code applications, are manufactured by coating the film substrate with a wax or resin-based ink coating containing black or other monochromatic pigments. Color images were traditionally printed with other ribbons containing multiple sets of three separate panels, with each panel containing one of the three primary subtractive colors: yellow, magenta and cyan. As a variation of this principle, some recently developed high-speed color printers use separate yellow, magenta, cyan and black ribbons, which the Company also manufactures. By overlaying various combinations of the subtractive colors (e.g., cyan over yellow to create green) with different intensities and dot placements, a process color image is created. The film substrate is also backcoated with various resin-based coatings which are designed to prevent distortion of the ribbon during the printing process, minimize static electricity and reduce abrasion of the thermal transfer printhead. The end-user applications for the Company's ribbons can be grouped into three fundamental categories: bar code, color and other. Bar Code Ribbons The Company's bar code thermal transfer ribbons include a wide range of products designed to maximize bar code thermal transfer printer performance for specific applications. Bar code thermal transfer ribbons are produced to printer manufacturer (OEM) and end-user specifications based on variables such as printer speed, electronic printhead design, heat management characteristics and printing pressure. The Company manufactures bar code thermal transfer ribbons which are designed to meet these specifications and to comply with industry bar code printing standards. The installed base of bar code printers has grown as "on-demand" printing of human and machine readable information has become more widely accepted for its efficiency and cost effectiveness in the retail, industrial, shipping and distribution, and medical sectors. A major factor in this growth has been the rise in the use of automatic identification and data collection systems in a variety of manufacturing, business and industrial applications, the most prevalent of which are on-demand printing systems. On-demand bar code printing systems permit users to print labels on-site that provide various types of information. For example, in the case of manufacturers, products may be labeled to provide information such as the date of manufacture, special serial, lot or purchase order numbers, accurate weights and measures, expiration dates and other similar information. Bar codes incorporating such information can be printed on a label which is affixed to the product at the time of production, even in high speed production line applications. In such bar code labeling systems, data is stored in a printed, computer-legible format (i.e., a bar code) which can be read with scanning devices, allowing the collection of the data contained in the bar code by a host computer. Such data may be used by the manufacturers, distributors and ultimate users of products who require bar code images that provide a very low failure rate for unscannable tags or labels. The Company expects that future growth in sales of bar code thermal transfer ribbons will result from an increase in the use of thermal transfer, as opposed to other printing technologies, and an increase in the use of mandated bar code standards in various industrial and retail applications. These standards are established by industry trade organizations for use by vendors doing business in a particular industry. Such standards have been adopted for use in the automotive, apparel, defense procurement, grocery, health care, retail and retail transportation, distribution, chemical and telecommunications industries. Another factor driving the increased use of bar coding is retail chain stores use of "compliance" shipping labels which are required for acceptance of deliveries. National retail chains such as K-Mart, Sears, J.C. Penney and Walmart have developed bar code label formats which must be used by vendors. Failure by vendors to do so may result in penalties or charge-backs. The Company expects this trend to continue and to spread to other industries. Although a number of different non-impact printing technologies may be used for bar code printing, the Company believes that thermal transfer printing is ideal for many bar code printing applications, particularly in harsh environments. Numerous retail, industrial, medical, food product, financial and other applications require dark, well-defined lines which are important for readily scannable bar codes as well as durable, high quality scratch and smudge resistant printed images. Thermal transfer printing meets these requirements and offers the ability to print on a variety of materials with very good reliability. Color Ribbons The Company is the sole manufacturer of process color thermal transfer ribbons in North America using separate panels of yellow, magenta, cyan and black from the same ribbon. Although color thermal transfer printers imported into North America by OEMs based outside of North America initially use color thermal transfer ribbons produced by Fujicopian Co., Ltd., the Company's experience has been that most such OEMs eventually purchase compatible color thermal transfer ribbons from the Company to avoid the foreign exchange risk, longer lead times, additional shipping and distribution expenses and tariffs associated with imports of thermal transfer ribbons into the United States. The major applications for color printers are business graphics and presentations, scientific and engineering drawings, medical imaging, graphic arts design, electronic publishing, and signage. Graphs and charts developed using currently available software can be either printed onto paper for inclusion in reports, presentations and other documents, or printed onto transparencies for use with overhead projectors. Substantial amounts of statistical, financial and other information can be summarized in easily readable and understandable color charts and graphs for business presentations. Engineering and scientific applications enable users to create more easily understandable color renderings of complex designs, drawings and images. In the graphic arts and electronic publishing industries, color printers are used to produce color advertising proofs, test designs for packaging, color layouts and computer-generated artistic renderings. The ultra-violet light resistance and durability of recently developed thermal transfer inks, as well as the ability to print on a wide variety of vinyl substrates, has created new applications for thermal transfer printing in both indoor and outdoor signage. The use of separate process color ribbons, and other recent advancements in thermal transfer printers, have increased color printing speeds by a factor of ten, compared to printers using a single ribbon composed of separate panels of yellow, magenta and cyan. This development is expected to open new avenues for full-color thermal transfer printing. Color thermal transfer ribbons are produced to printer OEM specifications based on variables such as printer speed, electronic printhead design, heat management characteristics and printing pressure. Film substrate characteristics and backcoat formulations may be adjusted to maximize the suitability of the ribbon for a particular application. Because of the highly specialized characteristics of color thermal transfer ribbons, such ribbons are not interchangeable among different printers. Thus, the Company manufactures one or more different ribbons for each color printer model manufactured by each OEM customer. The Company sells color thermal transfer ribbons only to the printer manufacturer thereby giving each OEM a proprietary ribbon to sell in the aftermarket. Other Products In addition to bar code and color thermal transfer ribbons, the Company manufactures other types of thermal transfer ribbons, primarily MICR and plain- paper facsimile ribbons. MICR ribbons are used to encode checks for processing through the United States banking system. Under the license agreement with Fujicopian Co., Ltd., the Company has the right to manufacture MICR ribbons protected by Fujicopian's patents and to use certain proprietary technology to manufacture such ribbons. Also included in other products are ribbons which are used in plain-paper thermal transfer facsimile machines due to the reliability, high quality and permanence of thermal transfer printing. SALES, MARKETING AND SUPPORT The Company sells its thermal transfer ribbons principally to printer OEMs which in turn sell ribbons under their own brand names to end users, either directly or through distributors and value-added resellers. The Company markets, sells and provides support for its thermal transfer ribbons in North America through its own sales and marketing staff principally based at its Amherst, New York headquarters. Since thermal transfer ribbon formulations and performance are significantly influenced by printer design, the Company's joint product development efforts with printer OEMs have been important to the Company's success. By selling primarily to printer OEMs, the Company has minimized its need for a large sales support staff. The Company also markets its bar code thermal transfer ribbons through a number of alternate distribution channels in situations where the Company believes that such marketing will not adversely affect sales of the Company's products to printer OEM customers. Such alternate distribution channels include master distributors, value-added resellers and large dealers. Value-added resellers include bar code system integrators, bar code printer resellers, computer supplies resellers and label converters. Dealers include label manufacturers, printer resellers and business forms dealers. As the market for bar code thermal transfer ribbons increasingly matures, end-users are expected to purchase their ribbon requirements at lower cost through these highly- competitive alternate distribution channels. In September 1995, the Company acquired the thermal transfer supplies business from one of its OEM customers, QMS, Inc., and began selling ribbons and other thermal transfer supplies under the QMS brand name directly to distributors, dealers and end-users. As a result of this acquisition, the Company expanded its product offerings to include non-ribbon thermal transfer supplies and created a telemarketing capability to serve small distributors, dealers and end-user customers. The Company employs a total of 34 people in its sales and marketing organization, including executives, managers and a customer service and support staff. Because the Company sells its thermal transfer ribbons primarily to large OEM customers, the Company achieves what it considers to be high sales productivity per sales executive. CUSTOMERS The Company's basic channel of distribution for its thermal transfer ribbons is the printer manufacturer or OEM who in turn sell to thousands of other distributors and end users of the ribbons. In addition, the Company sells its bar code thermal transfer ribbons to master distributors, value added resellers and large dealers. The Company also began to sell QMS thermal transfer supplies to dealers, distributors and end-users following the acquisition of this business during fiscal 1996. BACKLOG The Company's backlog at March 31, 1996 was $4.2 million, unchanged from March 31, 1995. MANUFACTURING The Company manufactures inks from pigments, waxes, resins and solvents, and then coats them onto large rolls of ultra-thin polyester film substrate. These coated "jumbo rolls" are then converted into finished ribbons by slitting and winding them onto cardboard or plastic cores before packaging and boxing. The manufacturing process operates 24 hours each day, seven days per week throughout the year, using four shifts of manufacturing employees. A typical manufacturing employee works 12 hours each day for four days, followed by four days off, then three days on and finally three days off. All manufacturing is performed at the Company's facilities located in Amherst, New York. The manufacturing function is supported by a plant and industrial engineering department which has implemented a detailed preventative maintenance program for the Company's manufacturing equipment. The Company's quality assurance department oversees required testing and audits both manufacturing processes and products. The production planning and control department utilizes a manufacturing resource planning system to plan and control material usage and shop schedules to satisfy customer orders. RAW MATERIALS The principal raw materials required by the Company are polyester film, pigments and coating solvents. Key supplies are generally purchased pursuant to contracts covering up to one year. Multiple sources exist for all raw materials, other than one of the premixed pigments used by the Company in the manufacture of certain color thermal transfer ribbons. The Company expects to begin in-house manufacturing of this premixed pigment and is actually developing alternative domestic sources. RESEARCH AND PRODUCT DEVELOPMENT The thermal transfer ribbon industry involves sophisticated technological and manufacturing processes. Historically, the Company's advanced technology had largely been provided by Fujicopian which invented, and is a leader in, thermal transfer printing technology. More recently, the Company significantly strengthened its own internal research and development staff and now employs 24 people dedicated to research and development. The Company works closely with Fujicopian and Armor, Fujicopian's European licensee, in the research and development of new products and manufacturing processes. The Company, Fujicopian and Armor conduct research and development strategy meetings to coordinate their efforts four times each year. During these meetings, each company presents its most recent research and development activities before selecting those programs to further develop independently. In this manner, each company is able to benefit from three separate research and development programs. The Company believes that this combined research and development provides the Company, Fujicopian and Armor with greater thermal transfer ribbon technology and research and development resources than many of their competitors. At times, the Company has retained selected universities, including the Rochester Institute of Technology, to supplement its internal research and development efforts and to provide technical expertise with respect to a variety of research and development efforts. The Rochester Institute of Technology is known for its work in the fields of imaging science and graphic arts. The Company's research and development expenses were $1.5 million, $2.2 million and $3.1 million during fiscal years 1994, 1995 and 1996, respectively. In view of the ongoing technological and proprietary developments which Fujicopian shares with the Company pursuant to the license agreement, the Company views its royalty payments under the license agreement (which amounted to $2.7 million during fiscal 1996) as an expense that, in part, yields an additional form of research and development benefit. LICENSE AND PATENTS The Company's license agreement with Fujicopian extends until 2008. Under the license agreement, Fujicopian has granted to the Company an exclusive license (with certain exceptions) to manufacture specified products in North America, including thermal transfer ribbons and improvements to such products developed by Fujicopian and the Company, and a non-exclusive right to sell and distribute such products in all countries other than those in Europe and Asia, using the technology and processes covered by the patents obtained and patent applications made and to be made by Fujicopian relating to such products and their manufacture. In exchange for such rights, the Company has agreed to pay annual royalties on sales of all thermal transfer ribbons. The Company believes that the two most important patents which it has the right to use under the license agreement are U.S. Patent No. 4,503,095 and U.S. Patent No. 4,572,684, both of which expire in 2003. Such patents relate to certain color thermal transfer ribbons and their use. The Company believes that these patents have discouraged competitors from manufacturing certain color thermal transfer ribbons in the United States. COMPETITION Competition in the color thermal transfer ribbon market has been limited as a result of Fujicopian's patents and the Company's right to use these patents under the license agreement. As a result of the exclusivity provided by the license agreement, the Company believes that its principal competition for increased sales of color thermal transfer ribbons to printer OEMs comes from competing technologies, such as ink jet and laser. In contrast, the bar code thermal transfer ribbon market is highly competitive as a number of manufacturers compete for market share. Unlike the color thermal transfer ribbon market, the Company does not enjoy the benefit of any patent protection with respect to the proprietary technology it utilizes (other than in the manufacture of MICR ribbons). General Ribbon of Japan, Ricoh Electronics, Sony Chemical and Dai Nippon Printing are all Japan-based companies that compete in North America. Competition from Japanese competitors has, to some extent, been limited by the foreign exchange risk, longer lead times, additional transportation and distribution expenses and tariffs associated with imports into the United States. However, certain of the Company's Japan-based competitors have either announced their intentions or have begun to manufacture all or part of their thermal transfer products in the United States to reduce their manufacturing costs. North American-based companies which compete in the bar code thermal transfer ribbon market include Chemicraft, Coding Products and AT&T. REGULATORY MATTERS The Company is subject to various federal, state and local environmental laws and regulations limiting or related to the use, emission, discharge, storage, treatment, handling and disposal of hazardous substances, particularly the federal Water Pollution Control Act, the Clean Air Act of 1970 (as amended in 1990), the Resource Conservation and Recovery Act (including amendments relating to underground tanks) and the special "Superfund" program. The Company has made significant investments in safety and environmental equipment, including solvent tank storage and thermal oxidizer systems, which have reduced solvent emissions by more than 95%. This emission amount, as reduced, is well within the current emission control standards and permit requirements as established by the New York Department of Environmental Conservation and the federal Environmental Protection Agency. The Company is also subject to federal , state and local laws and regulations relating to workplace safety and worker health, including those promulgated under the Occupational Safety and Health Act ("OSHA"). The Company believes that it currently is in compliance in all material respects with existing OSHA laws and regulations. EMPLOYEES As of March 31, 1996, the Company had 608 employees, of whom 34 were engaged in sales, 24 in research and development, 39 in finance and administration, 122 in manufacturing support, 360 in manufacturing operations and 29 in various part-time and temporary capacities. None of the Company's employees are represented by a collective bargaining organization and the Company considers its relationships with its employees to be good. CAUTIONARY STATEMENT PURSUANT TO "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Except for historical information, this report, the Company's quarterly reports to the Securities and Exchange Commission on Form 10-Q and periodic press releases, as well as other public documents and statements, contain "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the statements, including, among others:
. Significant price reductions or improvements in competing imaging technologies. . The rate of growth of the installed base of thermal transfer printers and the timing of orders. . Dependence on a small number of large OEM customers. . Competitive product offerings and pricing actions. . The availability and pricing of key raw materials, in particular polyester film and ink-making materials. . Productivity improvements in manufacturing, including the start-up of new coating equipment. . Dependence on key members of management.
Readers are cautioned not to place undue reliance on forward-looking statements. The Company undertakes no obligation to republish revised forward- looking statements to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events. ITEM 2. PROPERTIES The Company's main facility is located in Amherst, New York, a suburb of Buffalo, and contains office space, two manufacturing plants and two warehouses totaling approximately 300,000 square feet. The Company's principal manufacturing equipment consists of ink-making machines, coating machines, backcoating machines, slitting machines and ribbon-packaging machines. The Company's equipment is subject to a detailed preventative maintenance program and is believed to be in generally good working order. ITEM 3. LEGAL PROCEEDINGS The Company is not presently involved in any legal proceedings which, if determined adversely to the Company, would have a material adverse effect on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of fiscal 1996. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Incorporated by reference from the Annual Report, page 28, under the caption "Common Stock Information." ITEM 6. SELECTED FINANCIAL DATA The following selected financial data as of March 31, 1995 and 1996 and for the years ended March 31, 1994, 1995 and 1996 have been derived from the audited consolidated financial statements of the Company incorporated herein by reference. The selected financial data as of March 31, 1992, 1993 and 1994 and for the years ended March 31, 1992 and 1993 are derived from audited financial statements. The data set forth below should be read in conjunction with the consolidated financial statements and the notes thereto incorporated herein by reference:
March 31, -------------------------------------------- 1992 1993 1994 1995 1996 ------- ------- ------- ------- -------- (In thousands, except per share amounts) For the year ended: Revenues $32,324 $48,438 $61,576 $85,477 $ 88,448 Income from continuing operations 1,544 3,067 6,100 9,970 9,903 Net income from continuing operations per share 0.29 0.51 0.76 1.10 1.07 Cash dividends --- --- --- --- --- At year end: Total assets 45,975 57,483 76,876 97,944 115,461 Notes payable to banks and long-term debt $20,004 $24,745 $ 7,349 $ 5,637 $ 20,225
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Incorporated by reference from the Annual Report, pages 14 to 17, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations." ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements of the Company as listed under item 14(a)(1) of this Form 10-K and the independent auditors report thereon are incorporated by reference from the Annual Report, pages 18 to 27. Supplementary data are not required pursuant to Item 302 of Regulation S- K. The Company has elected, however, to present certain quarterly information in note 10 to its audited financial statements included on page 25 of the Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated by- reference from the Proxy Statement, pages 2 to 3, 5 to 6 and 18, under the captions "Proposal 1 - Election of Directors," "Executive Officers" and "Compliance with Section 16(a) of the Exchange Act." ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference from the Proxy Statement, pages 4 and 7 to 15, under the captions "Proposal 1 - Election of Directors - Compensation of Directors" and "Executive Compensation." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference from the Proxy Statement, page 16, under the caption "Security Ownership of Principal Stockholders, Directors, Nominees and Executive Officers." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference from the Proxy Statement, pages 9 and 17, under the captions "Executive Compensation - Compensation Committee Interlocks and Insider Participation" and "Certain Relationships and Related Transactions." PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A) (1) FINANCIAL STATEMENTS - THE FOLLOWING FINANCIAL STATEMENTS, TOGETHER WITH THE INDEPENDENT AUDITORS REPORT THEREON, ARE INCORPORATED BY REFERENCE TO THE FOLLOWING PAGES IN THE ANNUAL REPORT:
Page in Annual Report --------------------- Consolidated Statements of Income for the years ended March 31, 1994, 1995 and 1996 18 Consolidated Balance Sheets at March 31, 1995 and 1996 19 Consolidated Statements of Cash Flows for the years ended March 31, 1994, 1995 and 1996 20 Consolidated Statements of Stockholders' Equity for the years ended March 31, 1994, 1995 and 1996 21 Notes to Consolidated Financial Statements 22 - 25 Independent Auditors' Report 26
(2) FINANCIAL STATEMENT SCHEDULES: Independent Auditors' Report on Financial Statement Schedule Schedule VIII Valuation and qualifying accounts (Schedules other than those listed are omitted for the reason that they are not required, are not applicable or the required information is shown in the financial statements or notes thereto.) (3) EXHIBITS: Exhibits designated by an asterisk are management contracts and compensatory plans and arrangements required to be identified by Item 14(a)(3).
Exhibit Number Description - ------- ---------------------------------------- 3.1.1 Amended and Restated Certificate of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 to the Registration Statement of the Registrant on Form S-1 (Registration No. 33-62290) (the "Registration Statement on Form S-1").) 3.1.2 Amended and Restated Certificate of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3 of Form 10-Q dated February 3, 1995.) 3.2 By-laws of the Registrant. (Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1.) 4.1 Form of Certificate for Common Stock of the Registrant. (Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1.) 10.1.1 License Agreement, dated June 20, 1983, between Fuji Kagakushi Kogyo Company Limited (name subsequently changed to Fujicopian Co., Ltd.) ("Fujicopian") and the Registrant. (Incorporated by reference to Exhibit 10.1.1 to the Registration Statement on Form S-1.) 10.1.2 Amendment, dated February 24, 1987, to License Agreement referenced in Exhibit 10.1.1. (Incorporated by reference to Exhibit 10.1.2 to the Registration Statement on Form S-1.)
Exhibit Number Description - ------- ---------------------------------------- 10.1.3 Letter Agreement, dated March 6, 1989, between Fujicopian and the Registrant amending License Agreement referenced in Exhibit 10.1.1. (Incorporated by reference to Exhibit 10.1.3 to the Registration Statement on Form S-1.) 10.1.4 Amendment, dated April 24, 1990, to License Agreement referenced in Exhibit 10.1.1. (Incorporated by reference to Exhibit 10.1.4 to the Registration Statement on Form S-1.) 10.2 Indemnification Agreement, dated April 11, 1988, between Fujicopian and the Registrant. (Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1.) 10.3.1 Equipment Repurchase Agreement, dated March 6, 1989, between Fujicopian and the Registrant. (Incorporated by reference to Exhibit 10.3.1 to the Registration Statement on Form S-1.) 10.3.2 Assignment, dated March 30, 1989, of Equipment Repurchase Agreement referenced in Exhibit 10.3.1, from the Registrant to Norstar Bank, National Association ("Norstar Bank") (Incorporated by reference to Exhibit 10.3.2 to the Registration Statement on Form S-1.). 10.3.3 Letter Agreement, dated June 14, 1989, from Norstar Bank and the Registrant and agreed to by Fujicopian, clarifying terms of Assignment referenced in Exhibit 10.3.2. (Incorporated by reference to Exhibit 10.3.3 to the Registration Statement on Form S-1.) 10.3.4 Assignment, dated March 26, 1992, of Equipment Repurchase Agreement referenced in Exhibit 10.3.1, from Norstar Bank to Marine Midland Bank, N.A. ("Marine Midland Bank"), with consent by the New York Job Development Authority ("JDA"). (Incorporated by reference to Exhibit 10.3.4 to the Registration Statement on Form S-1.) 10.4.1 Cross-License Agreement, dated as of December 14, 1984, between International Business Machines Corporation ("IBM") and the Registrant. (Incorporated by reference to Exhibit 10.4.1 to the Registration Statement on Form S-1.) 10.4.2 Letter Agreement, dated September 3, 1987, between Fujicopian and the Registrant and related to Cross-License Agreement, dated as of July 1, 1986, between IBM and Fujicopian. (Incorporated by reference to Exhibit 10.4.2 to the Registration Statement on Form S-1.) 10.10 Memorandum of Understanding Concerning Heat-Sensitive Color Transfer Ribbons, dated April 1989, between Fujicopian and Dai Nippon Printing Co., Ltd., for the benefit, in part, of the Registrant (including an English translation thereof). (Incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-1.) 10.11 Letter Agreement, dated April 1, 1987, among Fujicopian, Toppan Printing Co., Ltd. and Toyo Ink Manufacturing Co., Ltd., for the benefit, in part, of the Registrant (including an English translation thereof). (Incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1.) 10.12.6 Registration Rights Agreement, dated May 6, 1988, between the Registrant and Norstar Bank. (Incorporated by reference to Exhibit 10.12.6 to the Registration Statement on Form S-1.) 10.12.7 Common Stock Subscription Warrant, dated May 6, 1988, between the Registrant and Norstar Bank. (Incorporated by reference to Exhibit 10.12.7 to the Registration Statement on Form S-1.) 10.13.1 Guarantee Agreement, dated March 30, 1989, made by the JDA to Norstar Bank for the benefit of and accepted by the Registrant. (Incorporated by reference to Exhibit 10.13.1 to the Registration Statement on Form S-1.) 10.13.2 Amendment, dated December 27, 1990, to Guarantee Agreement referenced in Exhibit 10.13.1. (Incorporated by reference to Exhibit 10.13.2 to the Registration Statement on Form S-1.) 10.13.3 Loan and Use Agreement, dated as of March 30, 1989, between Norstar Bank, the Town of Amherst Industrial Development Agency ("IDA") and the Registrant and agreed to by the JDA. (Incorporated by reference to Exhibit 10.13.3 to the Registration Statement on Form S-1.) 10.13.4 Mortgage, dated as of March 30, 1989, made by the Registrant and the IDA to Norstar Bank. (Incorporated by reference to Exhibit 10.13.4 to the Registration Statement on Form S-1.) 10.13.5 Indemnification and Guaranty Agreement, dated as of March 30, 1989, from the Registrant to the JDA. (Incorporated by reference to Exhibit 10.13.5 to the Registration Statement on Form S-1.)
Exhibit Number Description - -------- ---------------------------------------- 10.13.6 Subordination Agreement, dated as of March 30, 1989, by Norstar Bank for the benefit of the IDA, the JDA and the Registrant. (Incorporated by reference to Exhibit 10.13.6 to the Registration Statement on Form S-1.) 10.13.7 Mortgage Modification and Spreader Agreement, dated December 27, 1990, with respect to $1,400,000 Mortgage, among the JDA, Norstar Bank, the IDA and the Registrant. (Incorporated by reference to Exhibit 10.15.8 to the Registration Statement on Form S-1.) 10.14.1 Guarantee Agreement, dated as of March 30, 1989, made by the JDA to Norstar Bank for the benefit of and accepted by the Registrant. (Incorporated by reference to Exhibit 10.14.1 to the Registration Statement on Form S-1.) 10.14.2 Amendment, dated December 27, 1990, to Guarantee Agreement referenced in Exhibit 10.14.1. (Incorporated by reference to Exhibit 10.14.2 to the Registration Statement on Form S-1.) 10.14.3 Security Agreement (Machinery and Equipment), dated as of March 30, 1989, made by the Registrant for the benefit of Norstar Bank and accepted by the JDA. (Incorporated by reference to Exhibit 10.14.3 to the Registration Statement on Form S-1.) 10.14.4 Indemnification and Guaranty Agreement, dated as of March 30, 1989, made by the Registrant to the JDA. (Incorporated by reference to Exhibit 10.14.4 to the Registration Statement on Form S-1.) 10.14.5 Intercreditor Agreement, dated as of March 30, 1989, among Norstar Bank, The Buffalo and Erie County Regional Development Corporation ("RDC") and the JDA and acknowledged and accepted by the Registrant. (Incorporated by reference to Exhibit 10.14.5 to the Registration Statement on Form S-1.) 10.14.6 Letter Agreement, dated May 27, 1993 between the New York Job Development Authority and the Registrant assigning a loan to the New York Job Development Authority. (Incorporated by reference to Exhibit 10.14.6 of Form 10-K dated June 15, 1994.) 10.15.7 Mortgage Modification and Spreader Agreement, dated December 27, 1990, with respect to $1,000,000 Mortgage, among Norstar Bank, the IDA and the Registrant. (Incorporated by reference to Exhibit 10.15.7 to the Registration Statement on Form S-1.) 10.15.9 Security Agreement (Machinery and Equipment), dated December 27, 1990, from the Registrant to Norstar Bank and agreed to and accepted by the JDA and related to Machinery and Equipment Promissory Note. (Incorporated by reference to Exhibit 10.15.9 to the Registration Statement on Form S-1.) 10.15.10 Guarantee Agreement, dated December 27, 1990 from the JDA to Norstar Bank for the benefit of and acknowledged and accepted by the Registrant. (Incorporated by reference to Exhibit 10.15.10 to the Registration Statement on Form S-1.) 10.15.11 Indemnification and Guaranty Agreement, dated as of December 27, 1990, between the JDA and the Registrant. (Incorporated by reference to Exhibit 10.15.11 to the Registration Statement on Form S-1.) 10.15.12 Intercreditor Agreement, dated as of December 27, 1990, among Norstar Bank, the RDC and the JDA and acknowledged and agreed to by the Registrant. (Incorporated by reference to Exhibit 10.15.12 to the Registration Statement on Form S-1.) 10.15.14 Letter Agreement, dated June 3, 1993 between the New York Job Development Authority and the Registrant assigning a loan to the New York Job Development Authority. (Incorporated by reference to Exhibit 10.14.6 of Form 10-K dated June 15, 1994.) 10.16 Demand Note Agreement, dated March 31, 1995, between Fleet Bank and the Registrant. (Incorporated by reference to Exhibit 10.16 of Form 10-K dated June 15, 1995. 10.16.1 Amendment, dated June 17, 1996, to Demand Note Agreement referenced in Exhibit 10.16. 10.17.1 Assignment, dated March 26, 1992, of Security Agreement and Machinery and Equipment Promissory Note referenced in Exhibit 10.15.9, and of Guarantee Agreement referenced in Exhibit 10.15.10, from Norstar Bank to Marine Midland Bank and acknowledged and consented to by the JDA. (Incorporated by reference to Exhibit 10.17.1 to the Registration Statement on Form S-1.) 10.17.2 Modification and Reaffirmation Agreement, dated as of March 26, 1992, between Marine Midland Bank, the JDA and the Registrant. (Incorporated by reference to Exhibit 10.17.2 to the Registration Statement on Form S-1.)
Exhibit Number Description - -------- ---------------------------------------- 10.17.3 Letter Agreement, dated March 26, 1992, from Marine Midland Bank to Norstar Bank and agreed to by Norstar Bank and the JDA and related to Intercreditor Agreement referenced in Exhibit 10.15.12. (Incorporated by reference to Exhibit 10.17.3 to the Registration Statement on Form S-1.) 10.18 Demand Note Agreement, dated March 31, 1995, between Marine Midland Bank and the Registrant. (Incorporated by reference to Exhibit 10.18 of Form 10-K dated June 15, 1995.) 10.18.1 Demand Note Agreement, dated June 3, 1996 between Marine Midland Bank and the Registrant. *10.19.1 1984 Stock Plan of the Registrant. (Incorporated by reference to Exhibit 10.19.1 to the Registration Statement on Form S-1.) *10.19.2 Amendment No. 1, dated October 29, 1987, to 1984 Stock Plan of the Registrant referenced in Exhibit 10.19.1. (Incorporated by reference to Exhibit 10.19.2 to the Registration Statement on Form S-1.) *10.19.3 Amendment, dated July 27, 1989, to 1984 Stock Plan of the Registrant referenced in Exhibit 10.19.1. (Incorporated by reference to Exhibit 10.19.3 to the Registration Statement on Form S-1.) *10.19.4 Amendment, dated May 11, 1990, to 1984 Stock Plan of the Registrant referenced in Exhibit 10.19.1. (Incorporated by reference to Exhibit 10.19.4 to the Registration Statement on Form S-1.) *10.19.5 Amendment No. 2, dated July 26, 1990, to 1984 Stock Plan of the Registrant referenced in Exhibit 10.19.1. (Incorporated by reference to Exhibit 10.19.5 to the Registration Statement on Form S-1.) *10.19.6 Amendment, dated October 6, 1993, to 1984 Stock Plan of the Registrant referenced in Exhibit 10.19.1. (Incorporated by reference to Exhibit 4.3 to the Registration Statement of the Registrant on Form S-8 (Registration No. 33-71716) (the "Registration Statement on Form S-8").) *10.19.7 Amendment dated February 24, 1989, to 1984 Stock Plan of the Registrant referenced in Exhibit 10.19.1. (Incorporated by reference to Exhibit 10.20.4 to the Registration Statement on Form S-1.) *10.21.1 1990 Incentive Plan of the Registrant. (Incorporated by reference to Exhibit 10.21 to the Registration Statement on Form S-1.) *10.21.2 Amendment, dated October 6, 1993, to 1990 Incentive Plan of the Registrant referenced in Exhibit 10.21.1. (Incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-8.) *10.21.3 Amendment dated March 17, 1995, to 1990 Incentive Plan of the Registrant referenced in Exhibit 10.21.1. (Incorporated by reference to Exhibit 10.21.3 of Form 10-K dated June 15, 1995.) 10.23 Form of Demand Note executed by persons listed in item 404(c) of regulations S-K who are indebted to the Company as evidence of such indebtedness as set forth on the schedule attached to the form. 10.23.1 Form of Term Note executed by persons listed in item 404(c) of regulation S-K who are indebted to the Company as evidence of such indebtedness as set forth on the schedule attached to the form. *10.24.1 Continuity Agreement, dated as of January 1, 1991, between John W. O'Leary and the Registrant. (Incorporated by reference to Exhibit 10.24 to the Registration Statement on Form S-1.) *10.24.2 Executive Continuity Agreement, dated June 23, 1994, between James H. Groh and the Registrant. (Incorporated by reference to Exhibit 10.24.2 of Form 10-K dated June 15, 1994.) *10.24.3 Executive Continuity Agreement, dated June 27, 1994, between Richard A. Marshall and the Registrant. (Incorporated by reference to Exhibit 10.24.3 of Form 10-K dated June 15, 1994.) *10.24.4 Executive Continuity Agreement, dated June 21, 1994, between Michael J. Drennan and the Registrant. (Incorporated by reference to Exhibit 10.24.4 of Form 10-K dated June 15, 1994.) *10.24.5 Executive Continuity Agreement, dated June 23, 1994, between Vincent C. Dowell and the Registrant. (Incorporated by reference to Exhibit 10.24.5 of Form 10-K dated June 15, 1994.) *10.24.6 Executive Continuity Agreement, dated June 23, 1994, between Richard W. Dean and the Registrant. (Incorporated by reference to Exhibit 10.24.6 of Form 10-K dated June 15, 1994.) *10.24.7 Executive Continuity Agreement, dated June 27, 1994, between Nick S. Mandrycky and the Registrant. (Incorporated by reference to Exhibit 10.24.7 of Form 10-K dated June 15, 1994.) *10.24.8 Executive Continuity Agreement, dated May 1, 1995 between Rickey W. Wallace and the Registrant. (Incorporated by reference to Exhibit 10.24.8 of Form 10-K dated June 15, 1995.) *10.24.9 Executive Continuity Agreement, dated April 20, 1995 between F. Lynn Hamb and the Registrant. (Incorporated by reference to Exhibit 10.24.9 of Form 10-K dated June 15, 1995.)
Exhibit Number Description - --------- ---------------------------------------- *10.24.10 Executive Continuity Agreement, dated July 10, 1995 between David B. Lupp and the Registrant. (Incorporated by reference to Exhibit 10.4 of Form 10-Q dated August 16, 1995.) *10.25 Key Man Life Insurance Policy, dated December 17, 1992, issued by The Mutual of New York on the life of John W. O'Leary, in the amount of $2,000,000, with the Registrant named as beneficiary. (Incorporated by reference to Exhibit 10.25.2 to the Registration Statement on Form S-1.) 10.26.1 Lease Agreement, dated May 12, 1992, between Uniland Development Company and the Registrant with respect to 165 Creekside Drive, Tonawanda, New York. (Incorporated by reference to Exhibit 10.26.1 to the Registration Statement on Form S-1.) 10.26.2 First Amendment, dated April 23, 1993, to Lease Agreement referenced in Exhibit 10.26.1. (Incorporated by reference to Exhibit 10.26.2 to the Registration Statement on Form S-1.) 10.27.1 Lease Agreement, dated December 29, 1992, between Uniland Development Company and the Registrant with respect to 70 John Glenn, Amherst. (Incorporated by reference to Exhibit 10.27 to the Registration Statement on Form S-1.) 10.27.2 First Amendment, dated September 17, 1993, to Lease Agreement referenced in Exhibit 10.27.1. (Incorporated by reference to Exhibit 10.27.2 of Form 10-K dated June 15, 1994.) 10.28 Form of Registration Rights Agreement. (Incorporated by reference to Exhibit 10.28 to the Registration Statement on Form S-1.) *10.29 Form of Directors and Officers Indemnification Agreement. (Incorporated by reference to Exhibit 10.29 to the Registration Statement on Form S-1.) 10.30 1993 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 4.5 to the Registration Statement on Form S-8.) *10.31 1993 Outside Director Stock Option and Restricted Stock Plan. (Incorporated by reference to Exhibit 10.31 of Form 10-K dated June 15, 1995.) 10.32 Stock Option, Nondisclosure, Noncompetition and Consulting Agreement between the Company and Antonio M. Perez, dated December 17, 1992. (Incorporated by reference to Exhibit 4.10 to the Registration Statement on Form S-8.) 11 Statement re Computation of Per Share Earnings. 13 Portions of the 1996 Annual Report to Stockholders that are incorporated by reference. 21 Subsidiaries of the Registrant 23 Consent of KPMG Peat Marwick 27 Financial Data Schedule
(B) REPORTS ON FORM 8-K: None SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. By: /s/ John W. O'Leary --------------------------------------------------- John W. O'Leary President June 13, 1996 ------------------------------------------------- Date Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ John W. O'Leary President and Chief Executive June 13, 1996 - ------------------------------- Officer, Director John W. O'Leary (Chief Operating Officer) /s/ Michael J. Drennan Vice President - Finance, June 13, 1996 - ------------------------------- Treasurer, Secretary and Michael J. Drennan Chief Financial Officer /s/ Donald D. Lennox Chairman of the Board of Directors June 13, 1996 - ------------------------------- Donald D. Lennox /s/ Robert S. Anderson - --------------------------- Robert S. Anderson Director June 13, 1996 /s/ Alexander K. Daw --------------------------- Alexander K. Daw Director June 13, 1996 /s/ Michael J. Downey --------------------- Michael J. Downey Director June 13, 1996 /s/ Ronald J. Kubovcik - ---------------------- Ronald J. Kubovcik Director June 13, 1996 /s/ Richard A. Marshall Executive Vice President & June 13, 1996 - ------------------------ Chief Operating Officer, Richard A. Marshall Director /s/ William P. Montague - ------------------------ Director June 13, 1996 William P. Montague /s/ Albert J. Simone - ------------------------ Director June 13, 1996 Albert J. Simone
Independent Auditors' Report ---------------------------- The Board of Directors International Imaging Materials, Inc.: Under date of April 24, 1996, we reported on the consolidated balance sheets of International Imaging Materials, Inc. and subsidiaries as of March 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended March 31, 1996, as contained in the 1996 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year ended March 31, 1996. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedule as listed in item 14(a)2 of this annual report on Form 10-K. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statement taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG Peat Marwick LLP --------------------------------- KPMG Peat Marwick LLP Buffalo, New York April 24, 1996 S-1 Schedule VIII INTERNATIONAL IMAGING MATERIALS, INC. VALUATION AND QUALIFYING ACCOUNTS (In Thousands)
BALANCE AT AMOUNT CHARGE-OFFS BALANCE BEGINNING CHARGED TO AND END OF YEAR ENDED DESCRIPTION OF YEAR EXPENSES DISPOSALS YEAR ---------- ----------- ----------- ---------- ----------- ------- March 31, 1994 Allowance for doubtful accounts receivable $ 8 $ 10 $ --- $ 18 Inventory valuation 971 (79) 666 226 ---- ---- ---- ---- $ 979 $ (69) $ 666 $ 244 ---- ---- ---- ---- March 31, 1995 Allowance for doubtful accounts receivable 18 122 19 121 Inventory valuation 226 550 199 577 ---- ---- ---- ---- $ 244 $ 672 $ 218 $ 698 ---- ---- ---- ---- March 31, 1996 Allowance for doubtful accounts receivable 121 169 6 284 Inventory valuation 577 226 403 400 ---- ---- ---- ---- $ 698 $ 395 $ 409 $ 684 ---- ---- ---- ----
S-2 INDEX TO EXHIBITS -----------------
Exhibit Number Description Location - ------- ---------------------------------------- -------- 3.1.1 Amended and Restated Certificate of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 to the Registration Statement of the Registrant on Form S-1 (Registration No. 33-62290) (the "Registration Statement on Form S-1").) 3.1.2 Amended and Restated Certificate of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3 of Form 10-Q dated February 3, 1995.) 3.2 By-laws of the Registrant. (Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1.) 4.1 Form of Certificate for Common Stock of the Registrant. (Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1.) 10.1.1 License Agreement, dated June 20, 1983, between Fuji Kagakushi Kogyo Company Limited (name subsequently changed to Fujicopian Co., Ltd.) ("Fujicopian") and the Registrant. (Incorporated by reference to Exhibit 10.1.1 to the Registration Statement on Form S-1.) 10.1.2 Amendment, dated February 24, 1987, to License Agreement referenced in Exhibit 10.1.1. (Incorporated by reference to Exhibit 10.1.2 to the Registration Statement on Form S-1.) 10.1.3 Letter Agreement, dated March 6, 1989, between Fujicopian and the Registrant amending License Agreement referenced in Exhibit 10.1.1. (Incorporated by reference to Exhibit 10.1.3 to the Registration Statement on Form S-1.) 10.1.4 Amendment, dated April 24, 1990, to License Agreement referenced in Exhibit 10.1.1. (Incorporated by reference to Exhibit 10.1.4 to the Registration Statement on Form S-1.) 10.2 Indemnification Agreement, dated April 11, 1988, between Fujicopian and the Registrant. (Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1.) 10.3.1 Equipment Repurchase Agreement, dated March 6, 1989, between Fujicopian and the Registrant. (Incorporated by reference to Exhibit 10.3.1 to the Registration Statement on Form S-1.) 10.3.2 Assignment, dated March 30, 1989, of Equipment Repurchase Agreement referenced in Exhibit 10.3.1, from the Registrant to Norstar Bank, National Association ("Norstar Bank") (Incorporated by reference to Exhibit 10.3.2 to the Registration Statement on Form S-1.). 10.3.3 Letter Agreement, dated June 14, 1989, from Norstar Bank and the Registrant and agreed to by Fujicopian, clarifying terms of Assignment referenced in Exhibit 10.3.2. (Incorporated by reference to Exhibit 10.3.3 to the Registration Statement on Form S-1.) 10.3.4 Assignment, dated March 26, 1992, of Equipment Repurchase Agreement referenced in Exhibit 10.3.1, from Norstar Bank to Marine Midland Bank, N.A. ("Marine Midland Bank"), with consent by the New York Job Development Authority ("JDA"). (Incorporated by reference to Exhibit 10.3.4 to the Registration Statement on Form S-1.) 10.4.1 Cross-License Agreement, dated as of December 14, 1984, between International Business Machines Corporation ("IBM") and the Registrant. (Incorporated by reference to Exhibit 10.4.1 to the Registration Statement on Form S-1.) 10.4.2 Letter Agreement, dated September 3, 1987, between Fujicopian and the Registrant and related to Cross-License Agreement, dated as of July 1, 1986, between IBM and Fujicopian. (Incorporated by reference to Exhibit 10.4.2 to the Registration Statement on Form S-1.) 10.10 Memorandum of Understanding Concerning Heat-Sensitive Color Transfer Ribbons, dated April 1989, between Fujicopian and Dai Nippon Printing Co., Ltd., for the benefit, in part, of the Registrant (including an English translation thereof). (Incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-1.) 10.11 Letter Agreement, dated April 1, 1987, among Fujicopian, Toppan Printing Co., Ltd. and Toyo Ink Manufacturing Co., Ltd., for the benefit, in part, of the Registrant (including an English translation thereof). (Incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1.)
Exhibit Number Description Location - -------- ---------------------------------------- -------- 10.12.6 Registration Rights Agreement, dated May 6, 1988, between the Registrant and Norstar Bank. (Incorporated by reference to Exhibit 10.12.6 to the Registration Statement on Form S-1.) 10.12.7 Common Stock Subscription Warrant, dated May 6, 1988, between the Registrant and Norstar Bank. (Incorporated by reference to Exhibit 10.12.7 to the Registration Statement on Form S-1.) 10.13.1 Guarantee Agreement, dated March 30, 1989, made by the JDA to Norstar Bank for the benefit of and accepted by the Registrant. (Incorporated by reference to Exhibit 10.13.1 to the Registration Statement on Form S-1.) 10.13.2 Amendment, dated December 27, 1990, to Guarantee Agreement referenced in Exhibit 10.13.1. (Incorporated by reference to Exhibit 10.13.2 to the Registration Statement on Form S-1.) 10.13.3 Loan and Use Agreement, dated as of March 30, 1989, between Norstar Bank, the Town of Amherst Industrial Development Agency ("IDA") and the Registrant and agreed to by the JDA. (Incorporated by reference to Exhibit 10.13.3 to the Registration Statement on Form S-1.) 10.13.4 Mortgage, dated as of March 30, 1989, made by the Registrant and the IDA to Norstar Bank. (Incorporated by reference to Exhibit 10.13.4 to the Registration Statement on Form S-1.) 10.13.5 Indemnification and Guaranty Agreement, dated as of March 30, 1989, from the Registrant to the JDA. (Incorporated by reference to Exhibit 10.13.5 to the Registration Statement on Form S-1.) 10.13.6 Subordination Agreement, dated as of March 30, 1989, by Norstar Bank for the benefit of the IDA, the JDA and the Registrant. (Incorporated by reference to Exhibit 10.13.6 to the Registration Statement on Form S-1.) 10.13.7 Mortgage Modification and Spreader Agreement, dated December 27, 1990, with respect to $1,400,000 Mortgage, among the JDA, Norstar Bank, the IDA and the Registrant. (Incorporated by reference to Exhibit 10.15.8 to the Registration Statement on Form S-1.) 10.14.1 Guarantee Agreement, dated as of March 30, 1989, made by the JDA to Norstar Bank for the benefit of and accepted by the Registrant. (Incorporated by reference to Exhibit 10.14.1 to the Registration Statement on Form S-1.) 10.14.2 Amendment, dated December 27, 1990, to Guarantee Agreement referenced in Exhibit 10.14.1. (Incorporated by reference to Exhibit 10.14.2 to the Registration Statement on Form S-1.) 10.14.3 Security Agreement (Machinery and Equipment), dated as of March 30, 1989, made by the Registrant for the benefit of Norstar Bank and accepted by the JDA. (Incorporated by reference to Exhibit 10.14.3 to the Registration Statement on Form S-1.) 10.14.4 Indemnification and Guaranty Agreement, dated as of March 30, 1989, made by the Registrant to the JDA. (Incorporated by reference to Exhibit 10.14.4 to the Registration Statement on Form S-1.) 10.14.5 Intercreditor Agreement, dated as of March 30, 1989, among Norstar Bank, The Buffalo and Erie County Regional Development Corporation ("RDC") and the JDA and acknowledged and accepted by the Registrant. (Incorporated by reference to Exhibit 10.14.5 to the Registration Statement on Form S-1.) 10.14.6 Letter Agreement, dated May 27, 1993 between the New York Job Development Authority and the Registrant assigning a loan to the New York Job Development Authority. (Incorporated by reference to Exhibit 10.14.6 of Form 10-K dated June 15, 1994.) 10.15.7 Mortgage Modification and Spreader Agreement, dated December 27, 1990, with respect to $1,000,000 Mortgage, among Norstar Bank, the IDA and the Registrant. (Incorporated by reference to Exhibit 10.15.7 to the Registration Statement on Form S-1.) 10.15.9 Security Agreement (Machinery and Equipment), dated December 27, 1990, from the Registrant to Norstar Bank and agreed to and accepted by the JDA and related to Machinery and Equipment Promissory Note. (Incorporated by reference to Exhibit 10.15.9 to the Registration Statement on Form S-1.) 10.15.10 Guarantee Agreement, dated December 27, 1990 from the JDA to Norstar Bank for the benefit of and acknowledged and accepted by the Registrant. (Incorporated by reference to Exhibit 10.15.10 to the Registration Statement on Form S-1.) 10.15.11 Indemnification and Guaranty Agreement, dated as of December 27, 1990, between the JDA and the Registrant. (Incorporated by reference to Exhibit 10.15.11 to the Registration Statement on Form S-1.)
Exhibit Number Description Location - -------- ---------------------------------------- -------- 10.15.12 Intercreditor Agreement, dated as of December 27, 1990, among Norstar Bank, the RDC and the JDA and acknowledged and agreed to by the Registrant. (Incorporated by reference to Exhibit 10.15.12 to the Registration Statement on Form S-1.) 10.15.14 Letter Agreement, dated June 3, 1993 between the New York Job Development Authority and the Registrant assigning a loan to the New York Job Development Authority. (Incorporated by reference to Exhibit 10.14.6 of Form 10-K dated June 15, 1994.) 10.16 Demand Note Agreement, dated March 31, 1995, between Fleet Bank and the Registrant. (Incorporated by reference to Exhibit 10.16 of Form 10-K dated June 15, 1995.) 10.16.1 Amendment, dated June 17, 1996 to Demand Note Agreement referenced in Exhibit 10.16. 10.17.1 Assignment, dated March 26, 1992, of Security Agreement and Machinery and Equipment Promissory Note referenced in Exhibit 10.15.9, and of Guarantee Agreement referenced in Exhibit 10.15.10, from Norstar Bank to Marine Midland Bank and acknowledged and consented to by the JDA. (Incorporated by reference to Exhibit 10.17.1 to the Registration Statement on Form S-1.) 10.17.2 Modification and Reaffirmation Agreement, dated as of March 26, 1992, between Marine Midland Bank, the JDA and the Registrant. (Incorporated by reference to Exhibit 10.17.2 to the Registration Statement on Form S-1.) 10.17.3 Letter Agreement, dated March 26, 1992, from Marine Midland Bank to Norstar Bank and agreed to by Norstar Bank and the JDA and related to Intercreditor Agreement referenced in Exhibit 10.15.12. (Incorporated by reference to Exhibit 10.17.3 to the Registration Statement on Form S-1.) 10.18 Demand Note Agreement, dated March 31, 1995, between Marine Midland Bank and the Registrant. (Incorporated by reference to Exhibit 10.18 of Form 10-K dated June 15, 1995.) 10.18.1 Demand Note Agreement, dated June 3, 1996 between Marine Midland Bank and the Registrant. 10.19.1 1984 Stock Plan of the Registrant. (Incorporated by reference to Exhibit 10.19.1 to the Registration Statement on Form S-1.) 10.19.2 Amendment No. 1, dated October 29, 1987, to 1984 Stock Plan of the Registrant referenced in Exhibit 10.19.1. (Incorporated by reference to Exhibit 10.19.2 to the Registration Statement on Form S-1.) 10.19.3 Amendment, dated July 27, 1989, to 1984 Stock Plan of the Registrant referenced in Exhibit 10.19.1. (Incorporated by reference to Exhibit 10.19.3 to the Registration Statement on Form S-1.) 10.19.4 Amendment, dated May 11, 1990, to 1984 Stock Plan of the Registrant referenced in Exhibit 10.19.1. (Incorporated by reference to Exhibit 10.19.4 to the Registration Statement on Form S-1.) 10.19.5 Amendment No. 2, dated July 26, 1990, to 1984 Stock Plan of the Registrant referenced in Exhibit 10.19.1. (Incorporated by reference to Exhibit 10.19.5 to the Registration Statement on Form S-1.) 10.19.6 Amendment, dated October 6, 1993, to 1984 Stock Plan of the Registrant referenced in Exhibit 10.19.1. (Incorporated by reference to Exhibit 4.3 to the Registration Statement of the Registrant on Form S-8 (Registration No. 33-71716) (the "Registration Statement on Form S-8").) 10.19.7 Amendment dated February 24, 1989, to 1984 Stock Plan of the Registrant referenced in Exhibit 10.19.1. (Incorporated by reference to Exhibit 10.20.4 to the Registration Statement on Form S-1.) 10.21.1 1990 Incentive Plan of the Registrant. (Incorporated by reference to Exhibit 10.21 to the Registration Statement on Form S-1.) 10.21.2 Amendment, dated October 6, 1993, to 1990 Incentive Plan of the Registrant referenced in Exhibit 10.21.1. (Incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-8.) 10.21.3 Amendment dated March 17, 1995, to 1990 Incentive Plan of the Registrant referenced in Exhibit 10.21.1. (Incorporated by reference to Exhibit 10.21.3 of Form 10-K dated June 15, 1995.) 10.23 Form of Demand Note executed by persons listed in item 404(c) of regulation S-K who are indebted to the Company as evidence of such indebtedness as set forth on the schedule to the form. 10.23.1 Form of Term Note executed by persons listed in item 404(c) of regulation S-K who are indebted to the Company as evidence of such indebtedness as set forth on the schedule attached to the form.
Exhibit Number Description Location - -------- ---------------------------------------- -------- 10.24.1 Continuity Agreement, dated as of January 1, 1991, between John W. O'Leary and the Registrant. (Incorporated by reference to Exhibit 10.24 to the Registration Statement on Form S-1.) 10.24.2 Executive Continuity Agreement, dated June 23, 1994, between James H. Groh and the Registrant. (Incorporated by reference to Exhibit 10.24.2 of Form 10-K dated June 15, 1994.) 10.24.3 Executive Continuity Agreement, dated June 27, 1994, between Richard A. Marshall and the Registrant. (Incorporated by reference to Exhibit 10.24.3 of Form 10-K dated June 15, 1994.) 10.24.4 Executive Continuity Agreement, dated June 21, 1994, between Michael J. Drennan and the Registrant. (Incorporated by reference to Exhibit 10.24.4 of Form 10-K dated June 15, 1994.) 10.24.5 Executive Continuity Agreement, dated June 23, 1994, between Vincent C. Dowell and the Registrant. (Incorporated by reference to Exhibit 10.24.5 of Form 10-K dated June 15, 1994.) 10.24.6 Executive Continuity Agreement, dated June 23, 1994, between Richard W. Dean and the Registrant. (Incorporated by reference to Exhibit 10.24.6 of Form 10-K dated June 15, 1994.) 10.24.7 Executive Continuity Agreement, dated June 27, 1994, between Nick S. Mandrycky and the Registrant. (Incorporated by reference to Exhibit 10.24.7 of Form 10-K dated June 15, 1994.) 10.24.8 Executive Continuity Agreement, dated May 1, 1995 between Rickey W. Wallace and the Registrant. (Incorporated by reference to Exhibit 10.24.8 of Form 10-K dated June 15, 1995.) 10.24.9 Executive Continuity Agreement, dated April 20, 1995 between F. Lynn Hamb and the Registrant. (Incorporated by reference to Exhibit 10.24.9 of Form 10-K dated June 15, 1995.) 10.24.10 Executive Continuity Agreement dated July 10, 1995 between David B. Lupp and the Registrant. (Incorporated by reference to Exhibit 10.4 of Form 10-Q dated August 16, 1995.) 10.25 Key Man Life Insurance Policy, dated December 17, 1992, issued by The Mutual of New York on the life of John W. O'Leary, in the amount of $2,000,000, with the Registrant named as beneficiary. (Incorporated by reference to Exhibit 10.25.2 to the Registration Statement on Form S-1.) 10.26.1 Lease Agreement, dated May 12, 1992, between Uniland Development Company and the Registrant with respect to 165 Creekside Drive, Tonawanda, New York. (Incorporated by reference to Exhibit 10.26.1 to the Registration Statement on Form S-1.) 10.26.2 First Amendment, dated April 23, 1993, to Lease Agreement referenced in Exhibit 10.26.1. (Incorporated by reference to Exhibit 10.26.2 to the Registration Statement on Form S-1.) 10.27.1 Lease Agreement, dated December 29, 1992, between Uniland Development Company and the Registrant with respect to 70 John Glenn, Amherst. (Incorporated by reference to Exhibit 10.27 to the Registration Statement on Form S-1.) 10.27.2 First Amendment, dated September 17, 1993, to Lease Agreement referenced in Exhibit 10.27.1. (Incorporated by reference to Exhibit 10.27.2 of Form 10-K dated June 15, 1994.) 10.28 Form of Registration Rights Agreement. (Incorporated by reference to Exhibit 10.28 to the Registration Statement on Form S-1.) 10.29 Form of Directors and Officers Indemnification Agreement. (Incorporated by reference to Exhibit 10.29 to the Registration Statement on Form S-1.) 10.30 1993 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 4.5 to the Registration Statement on Form S-8.) 10.31 1993 Outside Director Stock Option and Restricted Stock Plan. (Incorporated by reference to Exhibit 10.31 of Form 10-K dated June 15, 1995.) 10.32 Stock Option, Nondisclosure, Noncompetition and Consulting Agreement between the Company and Antonio M. Perez, dated December 17, 1992. (Incorporated by reference to Exhibit 4.10 to the Registration Statement on Form S-8.) 11 Statement re Computation of Per Share Earnings. 13 Portions of the 1996 Annual Report to Stockholders that are incorporated herein by reference..................... 21 Subsidiaries of the Registrant 23 Consent of KPMG Peat Marwick 27 Financial Data Schedule
EX-10.16.1 2 AMEND. TO DEMAND NOTE AGREEMENT EXHIBIT 10.16.1 [LETTERHEAD OF FLEET BANK] June 17, 1996 Mr. David Lupp Vice President/Controller International Imaging Materials, Inc. 310 Commerce Drive Amherst, NY 14228 Dear Dave: I am pleased to inform you that Fleet Bank has renewed International Imaging Materials Inc.'s $20,ooo,ooo.00 line of credit. The new expiration date will be September 30,1997. All other terms and conditions of the facility (i.e. rate, etc.) remain unchanged. We have also renewed the company's Foreign Exchange line in the amount of $1,500,000.00 and Corporate Mastercard in the amount of $250,000.00 both through September 30, 1997. I look forward to working with you and Mike for another year. If you need anything further regarding this matter, please do not hesitate to call. Sincerely /s/ John J. Cronin J.J. Cronin Vice President EX-10.18.1 3 DEMAND NOTE AGREEMENT EXHIBIT 10.18.1 [LETTERHEAD OF MIDLAND BANK] June 3, 1996 Mr. Michael J. Drennan Vice President -Finance International Imaging Materials, Inc. 310 Commerce Drive Amherst, New York 14228-2396 Dear Mike: We are please to advise you that Marine Midland Bank, is willing to make available to you a discretionary line of credit on the following terms: Borrower: International Imaging Materials, Inc. Amount: $10,000,.000 in the aggregate at any one time outstanding Nature: Advances will be made at the discretion of the Bank and will be payable on demand. Interest Rate Options: Prime Rate of Marine Midland Bank or such other rate as may be quoted as in effect from time to time, including LIBor plus 20 basis points. Collateral: Unsecured. Financial Statements: Quarterly within 45 days of quarters end, and annually within 90 days of the fiscal year end. Purpose: Working capital and letters of credit. The facility will be available until March 31, 1997 unless extended, replaced, or terminated by either party. This facility shall be under continuous review, and our decision to extend or renew will be based, in part, upon receipt of timely annual and quarterly financial statements. Unless we mutually agree otherwise this facility will not be available after March 31, 1997. Mr. Michael J. Drenan June 3, 1996 Page 2 We believe the aforementioned facility should meet your requirements. If the terms of this letter are acceptable to you please execute and return the enclosed duplicate original of this letter by June 21, 1996 or this letter shall become null and void . Should you have any questions as to any aspect of this financing, please contact me. Very truly yours, /s/ Cary J. Haller Cary J. Haller Vice President Agreed and accepted this 11th day of June, 1996 ------------- ---- INTERNATIONAL IMAGING MATERIALS, INC. BY:/s/ Michael J. Drennan VP Finance --------------------------------------------- Title CJH/keb Enclosure EX-10.23 4 FORM OF DEMAND NOTE EXHIBIT 10.23 FORM OF DEMAND NOTE (REFERENCE ATTACHED SCHEDULE) ------------------- AMOUNT: AMHERST, NEW YORK DATE: FOR VALUE RECEIVED, the undersigned promises to pay to the order of INTERNATIONAL IMAGING MATERIALS, INC. ("IIMAK") at its offices at 310 Commerce Drive, Amherst, New York 14228, the sum of and /100 dollars ($ ), - ----------------------------------------- ---------- 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 employment 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 United 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. - --------------------------- ------------------------------------------ Date Name SCHEDULE OF DEMAND NOTES OF PERSONS INDEBTED TO INTERNATIONAL IMAGING MATERIALS, INC. IN AN AGGREGATE AMOUNT IN EXCESS OF $60,000
Date of Payor Amount Note of Note of Note ------- ------- ------- May 2, 1994 John W. O'Leary $ 267,600.00 February 23, 1995 John W. O'Leary 615,200.00 April 6, 1995 John W. O'Leary 151,652.03 May 8, 1995 John W. O'Leary 433,653.97 March 1, 1996 John W. O'Leary 248,455.93 April 11, 1996 John W. O'Leary 656,729.00 ------------- $2,373,290.93 ------------- May 8, 1995 Richard A. Marshall $ 113,919.07 April 11, 1996 Richard A. Marshall 21,706.00 ------------- $ 135,625.07 ------------- December 21, 1993 Michael J. Drennan $ 86,324.38 April 18, 1994 Michael J. Drennan 31,012.00 May 2, 1994 Michael J. Drennan 135,821.39 December 27, 1994 Michael J. Drennan 15,200.00 March 24, 1995 Michael J. Drennan 171,357.45 April 18, 1995 Michael J. Drennan 37,974.00 May 8, 1995 Michael J. Drennan 368,339.43 January 2, 1996 Michael J. Drennan 8,300.00 April 1, 1996 Michael J. Drennan 218,691.81 April 11, 1996 Michael J. Drennan 157,559.00 April 11, 1996 Michael J. Drennan 67,008.00 ------------- $1,297,587.46 ------------- May 8, 1995 Vincent C. Dowell $ 56,959.53 April 11, 1996 Vincent C. Dowell 10,853.00 ------------- $ 67,812.53 ------------- May 8, 1995 Nick S. Mandrycky $ 56,959.53 ------------- May 8, 1995 Richard W. Dean $ 56,959.53 September 13, 1995 Richard W. Dean 30,096.88 April 11, 1996 Richard W. Dean 16,694.00 ------------- $ 103,750.41 ------------- September 19, 1995 David B. Lupp $ 29,627.62 March 25, 1996 David B. Lupp 3,860.00 March 29, 1996 David B. Lupp 24,495.12 ------------- $ 57,982.74 -------------
EX-10.23.1 5 FORM OF TERM NOTE EXHIBIT 10.23.1 FORM OF TERM NOTE (REFERENCE ATTACHED SCHEDULE) ------------------ AMOUNT: AMHERST, NEW YORK PAYOR: DATE: FOR VALUE RECEIVED, the undersigned ("Borrower") 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 ____________________________ and _____/100 ($____________) or, if less, the aggregate unpaid principal amount of all advances made by IIMAK to the Borrower pursuant to the terms of this Note. Borrower may obtain advances under this Note up to the principal sum hereof by making requests of IIMAK from time to time either orally or in writing (herein called "Loan Requests"). If IIMAK, in its sole discretion, decides to honor a Loan Request, then IIMAK shall advance the amount of the Loan Request to Borrower. In addition, IIMAK and the Borrower shall endorse the grid attached hereto, which is a part of this Note, accordingly. All payments made on account of principal hereof shall be endorsed by both IIMAK and Borrower on the attached grid. One-third of the principal sum hereof, or if less, the entire remaining unpaid principal balance, is due and payable on each of May 1, 1997, 1998 and 1999. Irrespective of these scheduled repayments, this Note shall be immediately due and payable upon the termination of the Borrower's employment with IIMAK for any reason. The holder of the Note has full recourse against all of the Borrower's assets for collection of the unpaid principal balance on the Note. The Borrower 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 Borrower 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 United 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 Borrower for the benefit of creditors. 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. 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 or amendment of any provisions of this Note shall be made, except by a written agreement duly executed by the Borrower and the holder hereof. The Borrower 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 Borrower agrees to pay all costs and expenses incurred by the holder hereof in enforcing this Note, including, without limitation, actual attorneys' fees. - -------------------------- ------------------------------------------- Date Borrower SCHEDULE OF TERM NOTES OF PERSONS INDEBTED TO INTERNATIONAL IMAGING MATERIALS, INC. IN AN AGGREGATE AMOUNT IN EXCESS OF $60,000
Date of Payor Amount Note of Note of Note ------- ------- ------- April 10, 1996 John W. O'Leary $71,439.00 --------- April 10, 1996 Richard A. Marshall $38,178.00 --------- April 10, 1996 Michael J. Drennan $20,769.00 --------- April 10, 1996 Vincent C. Dowell $21,526.00 --------- April 10, 1996 Nick S. Mandrycky $20,636.00 --------- April 10, 1996 Richard W. Dean $20,921.00 --------- April 10, 1996 David B. Lupp $16,154.00 ---------
EX-11 6 STATEMENT RE COMPUTATION OF PER SHARE EXHIBIT 11 INTERNATIONAL IMAGING MATERIALS, INC. CALCULATION OF NET INCOME PER SHARE OF COMMON STOCK (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Fiscal Year Ended March 31 -------------------------- 1994 1995 1996 -------- ------- ------- Net income $5,668 $9,970 $9,903 Adjustment to net income - reduction of interest expense, net of tax, resulting from the modified treasury stock method 19 --- --- ------ ------ ------ Adjusted net income $5,687 $9,970 $9,903 ------ ------ ------ Weighted average shares outstanding 7,248 8,326 8,750 Common stock equivalents for restricted stock, stock options and warrants 817 767 474 ------ ------ ------ Weighted average common shares outstanding as adjusted 8,065 9,093 9,224 ------ ------ ------ Net income per share of common stock $.71 $1.10 $ 1.07 ------ ------ ------
EX-13 7 PORTIONS OF THE 1996 ANNUAL REPORT EXHIBIT 13 INTERNATIONAL IMAGING MATERIALS, INC. PORTIONS OF 1996 ANNUAL REPORT TO STOCKHOLDERS PAGE 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- Fiscal 1996 was a year of transition for the Company. The financial performance for the year reflected the resolution of events that began in fiscal 1995, while significant investments were made in the future of the Company. During the first half of fiscal 1995, the Company experienced a surge of incoming orders in all parts of its business. The Company's manufacturing capacity could not absorb this orders increase and lead times lengthened, causing customers throughout the distribution channels to further increase their orders and inventory levels to avoid stock-out situations. A total of $44.5 million in orders were received in this six-month period, a 30% increase over the $34.3 million of orders placed in the second half of fiscal 1994. In response, the Company increased its manufacturing capacity largely through productivity improvements, resulting in sequential quarterly revenue records and significant lead time reductions throughout fiscal 1995. These lead time reductions allowed customers to reduce their excess inventory levels, and consequently, they sharply cut back their orders to the Company. This resulted in a significant decrease in quarterly revenues for the Company, from $22.3 million in the fourth quarter of fiscal 1995 to $19.0 million in the first quarter of fiscal 1996. These order reductions continued through the first half of fiscal 1996, until orders again reflected end user market demand beginning in the third quarter of fiscal 1996. Fujicopian's thermal transfer licensee for Europe, Armor, also experienced an influx of orders during fiscal 1995 which exceeded their manufacturing capacity. The Company used its coating capacity not consumed by customers' requirements to supply Armor with thermal transfer jumbo rolls. This business did not recur in fiscal 1996 once Armor's manufacturing capacity was increased sufficiently. This sequence of events resulted in fiscal 1996 revenues of $88.4 million, an increase of only 3.5% over fiscal 1995 revenues of $85.5 million. Revenues in fiscal 1995, however, increased 38.8% from $61.6 million in fiscal 1994. Included in fiscal 1995 and fiscal 1994, respectively, were $6.0 million and $1.6 million of revenue, primarily jumbo rolls supplied to Armor, which did not recur in fiscal 1996. Therefore, recurring revenues grew 11.3% from fiscal 1995 to fiscal 1996, and 32.5% from fiscal 1994 to fiscal 1995, a compound annual growth rate of 21.5%, more consistent with actual market growth during this three-year period. [Bar chart depicting recurring revenues in thousands] 1992 31,492; 1993 48,432; 1994 59,976; 1995 79,318; 1996 88,448. The Company sells its ribbons primarily to printer original equipment manufacturers (OEM's), which in turn sell the ribbons under their own brand names to end users, either directly or through distributors and value-added resellers. Recurring revenues to OEM customers in fiscal 1996 were $65.9 million, comprised 74.6% of total revenues, and increased 10.1% from $59.9 million in fiscal 1995. This increase primarily reflects the transfer of ribbon production for a significant color ribbon program from Fujicopian, new product lines introduced to existing tag and label customers, the addition of a significant new tag and label customer, and the overall growth of applications for tag and label printing. The Company also sells its ribbons directly to distributors and dealers where such sales do not adversely affect the Company's OEM customers. Domestic distributor revenues in fiscal 1996 were $21.3 million, comprised 24.1% of total revenues, and increased 13.6% from $18.8 million in fiscal 1995. In September 1995, the Company acquired the thermal transfer supplies business from one of its OEM customers, QMS Inc., and began selling ribbons and other thermal transfer supplies under the QMS brand name directly to distributors, dealers and end users. The higher selling prices for ribbons and other items included in the QMS supplies business, 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 end-user migration towards this distributor channel from the OEM channel as the market for tag and label ribbons matures, all contributed to this growth. PAGE 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED The rapid expansion of the market for tag and label printing in South America, and the Company's new marketing programs targeting these opportunities, were principally responsible for the addition of several new customers in the international distributor channel. Revenues for this channel were $1.2 million in fiscal 1996, comprised 1.3% of total revenues, and increased 41.2% from $840,000 in fiscal 1995. Recurring revenues for the OEM channel increased 27.4% from fiscal 1994 to fiscal 1995, principally due to the transfer of ribbon production for two color printer programs to the Company from Fujicopian late in fiscal 1994, new tag and label product lines introduced to existing customers, the addition of a significant new tag and label customer, and the overall growth of the installed base of thermal transfer printers. Domestic distributor revenues increased 48.4% from fiscal 1994 to fiscal 1995, reflecting the addition of several new significant customers, new high performance product lines introduced late in fiscal 1994, and overall tag and label ribbon aftermarket growth. The Company's ribbon unit selling prices in total were comparable from fiscal 1994 through fiscal 1996. Slight increases in selling prices to color ribbon OEM customers, significantly higher selling prices to dealers, distributors and end-users for QMS's thermal transfer supplies, and a shift in mix towards the higher selling prices in the tag and label distributor channels, offset selling price decreases to tag and label ribbon OEM and distributor customers. Gross margins were 29.6% of revenues in fiscal 1996 as compared to 29.8% in fiscal 1995. The higher base of fixed overhead costs, which was not absorbed by the declining revenues from customers reducing their inventory levels, was partially offset by the higher margins on the QMS thermal transfer supplies business and no management bonuses in fiscal 1996. The gross margin improvement in fiscal 1995 from 27.9% of revenues in fiscal 1994 primarily reflects production efficiencies in direct labor and improved leverage of fixed overhead costs as the Company expanded its manufacturing capacity to fulfill the surge of incoming orders. Total operating expenses were $10.9 million in fiscal 1996, an increase of 14.1% from $9.6 million in fiscal 1995. Research and development expenses increased $862,000 due to increased staffing and sampling of new products as investments in future revenue growth. Selling expenses increased $515,000 due to the creation of a telemarketing capability for QMS thermal transfer supplies, and the hiring of additional personnel to drive the Company's sales growth, partially offset by no management bonuses in fiscal 1996. Total operating expenses in fiscal 1995 increased by 36.6% from $7.0 million in fiscal 1994. Research and development expenses increased $672,000 due to the hiring of additional personnel and distribution of samples to customers. Selling expenses increased $723,000, primarily due to increased staffing and promotional expenses. Administrative expenses increased $1.2 million, principally due to increased staffing and the first full year of expenses as a publicly-held Company in fiscal 1995. [Bar chart depicting the debt to equity ratio] 1992 1.06; 1993 1.13; 1994 0.12; 1995 0.08; 1996 .26. Interest expense was $136,000 in fiscal 1996, a decrease of 52.1% from $284,000 in fiscal 1995. Interest incurred on the Company's lines of credit in fiscal 1996 to fund the construction of and equipment for the 100,000 square foot manufacturing facility, the purchase of the QMS thermal transfer supplies business, and the repurchase of 315,400 shares of the Company's common stock was offset by $612,000 of interest capitalized as part of the cost of the new facility. Interest income was $101,000 in fiscal 1996, a decrease of 76.3% from $427,000 in fiscal 1995, due to the use of the Company's cash and short-term investments prior to the borrowings on the lines of credit. Interest expense in fiscal 1995 decreased 55.6% from $639,000 in fiscal 1994, while interest income increased 133.3% from $183,000 in fiscal 1994. These improvements resulted from the repayment of a portion of the PAGE 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED Company's debt with some of the proceeds from the Company's initial public offering of common stock in fiscal 1994, as well as higher short-term investment balances in fiscal 1995 resulting from the Company's record financial performance. Income taxes in fiscal 1996 were $5.3 million or 35.0% of income before income taxes. In fiscal 1995, income taxes were $6.1 million or 38.0% of income before income taxes. Income taxes in fiscal 1994 were $3.6 million or 37.0% of income from continuing operations before income taxes. Changes in the New York State alternative minimum tax calculation benefiting the Company and the benefit from the Company's foreign sales subsidiary established at the beginning of fiscal 1996 contributed to this rate reduction in fiscal 1996. The actual tax payments in all three years were significantly lower than the expense reflected in the Company's statements of income since a substantial portion of the tax provisions were deferred, primarily reflecting the temporary benefits of accelerated depreciation of plant and equipment on the Company's tax returns. Tax payments were also reduced by tax deductions from the exercise of non-qualified stock options and compensatory warrants. For financial reporting purposes, these tax benefits are recognized as increases in additional paid-in capital, rather than as reductions of income tax expense. Effective March 31, 1994, the Company adopted a plan to dispose of its software division which was completed during fiscal 1995. The division was established during fiscal 1993 to develop a low-cost, user-friendly software program to increase the consumption of the Company's color ribbons. The decision to discontinue this division resulted from the introduction of several similar programs by other software companies. The Company's financial performance over the last three fiscal years is best understood in terms of the entire three-year period, rather than concentrating on the unique events temporarily influencing each individual year's results. Net income grew 74.7% on a 43.6% revenue increase from fiscal 1994 through fiscal 1996. Net income as a percentage of sales increased from 9.2% of revenues in fiscal 1994 to 11.2% of revenues in fiscal 1996. Return on invested capital improved from 10.0% in fiscal 1994 to 11.1% in fiscal 1996. Return on total assets increased from 8.6% in fiscal 1994 to 9.4% in fiscal 1996. [Bar chart depicting net capital expenditures in thousands] 1992 $8,912; 1993 $8,819; 1994 $13,435; 1995 $14,235; 1996 $17,477. At the same time as these operating results were improving, the Company invested heavily in its future. These investments include $45.1 million of capital expenditures, including 150,000 square feet of facilities and the equipment needed to both increase manufacturing capacity and improve production efficiency, as well as a dedicated research and development pilot facility for the production of new product samples for customers. A total of $6.8 million was spent on research and development as the Company became less dependent on Fujicopian and established its own capability to develop new products tailored to the specific requirements of the North American market. The Company also paid $5.6 million for the QMS thermal transfer supplies business and created a telemarketing capability to serve small distributors, dealers and end-user customers both now and in the future. These investments were funded by $27.2 million from the Company's initial public offering of common stock in fiscal 1994 and an additional $34.4 million generated by operating activities. [Bar chart depicting cash flow from operations in thousands] 1992 $4,377; 1993 $7,306; 1994 $10,888; 1995 $16,972; 1996 $18,958; PAGE 17 - ------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED Liquidity and Capital Resources - ------------------------------- The Company's financial condition at March 31, 1996 remained strong, with long- term debt comprising only 2.8% of total capitalization. Cash from operating activities in fiscal 1996 of $9.9 million, short-term borrowings on the Company's lines of credit of $16.3 million and $7.0 million of cash and short- term investments at March 31, 1995 funded $17.5 million of capital expenditures, the purchase of the QMS thermal transfer supplies business for $5.6 million and the repurchase of 315,400 shares of the Company's common stock for another $5.6 million. The Company expects to spend approximately $15 million on capital expenditures in fiscal 1997, primarily to complete the construction of and purchase equipment for the new manufacturing facility. The Company anticipates funding these capital expenditures and its working capital requirements, in addition to repaying approximately $10 million of the $16.3 million balance on its $30.0 million lines of credit with two banks at March 31, 1996, with cash generated by operating activities in fiscal 1997. The Company believes that internally generated cash will be more than sufficient to finish repaying the lines of credit and fund working capital, capital expenditures and debt service requirements in fiscal 1998. Trade receivables increased $4.3 million in fiscal 1996, primarily due to disproportionately higher sales volumes in February and March 1996. The number of days of sales in trade receivables at March 31, 1996 was 48, as compared to 47 days at March 31, 1995, consistent with the Company's typical range of 45 to 50 days. Inventories increased $2.3 million during fiscal 1996, as the Company used available manufacturing capacity to increase its finished goods inventory in anticipation of future revenue increases, as well as create the higher inventory levels required to service the growing proportion of dealer, distributor and end-user sales. The $4.7 million increase in other assets from March 31, 1995 principally consists of the cost of the assets acquired in connection with the purchase of the QMS thermal transfer supplies business, which are being amortized over the next five years. The Company also repurchased 315,400 shares of its common stock during the fourth quarter of fiscal 1996, at an average purchase price of $17.68 per share. These shares will be used to fund future stock option and warrant exercises, for which 5,000 shares were issued as of March 31, 1996. Cash from operating activities in fiscal 1995 of $18.9 million funded $14.2 million of capital expenditures, $1.7 million of scheduled debt repayments, and a $2.0 million increase in cash and short-term investments. Raw material inventories increased $3.0 million in the fourth quarter of fiscal 1995 due to purchases to support future revenue growth and to delay the impact of anticipated price increases. Trade accounts payable increased $3.5 million in the fourth quarter of fiscal 1995 due primarily to these raw material purchases. During fiscal 1995 and 1996, the Company loaned $3.9 million and $3.4 million, respectively, to certain officers and a director in conjunction with the exercise of non-qualified stock options and warrants. These exercises, in addition to the lapse of restrictions in fiscal 1996 on restricted stock grants, generated tax deductions of $9.8 million and $6.3 million for the Company in fiscal 1995 and 1996, respectively. During fiscal 1996, $4.2 million of these loans were repaid through the surrender of shares of common stock to the Company. The portions of these loans which funded the officers' and director's personal income tax withholdings are included in other assets since it is the intention of the Company to allow repayment beyond March 31, 1997. The portions of these loans that funded the exercise price of the options and warrants are included as a reduction of stockholders' equity. These demand notes are secured by the stock and personal assets of the officers and director. [Bar chart depicting stockholder's equity in thousands] 1992 $18,887; 1993 $21,838; 1994 $59,110; 1995 $73,689; 1996 $78,120. Inflation - --------- Inflationary factors have not had a significant effect on the Company's overall revenues or profitability during the past three years. PAGE 18 INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Years Ended March 31, ------------------------------------------- 1994 1995 1996 ------------- ------------- ------------- (In thousands, except per share amounts) Revenues $61,576 $85,477 $88,448 Cost of goods sold 44,425 59,968 62,253 ------- ------- ------- Gross profit 17,151 25,509 26,195 ------- ------- ------- Operating expenses: Research and development 1,545 2,217 3,079 Selling 2,912 3,635 4,150 General and administrative 2,548 3,720 3,695 ------- ------- ------- Total operating expenses 7,005 9,572 10,924 ------- ------- ------- Operating income 10,146 15,937 15,271 Interest expense 639 284 136 Interest income (183) (427) (101) ------- ------- ------- Income from continuing operations before income taxes 9,690 16,080 15,236 Income taxes 3,590 6,110 5,333 ------- ------- ------- Income from continuing operations 6,100 9,970 9,903 Loss from discontinued operation, net of income tax benefits of $255 432 --- --- ------- ------- ------- Net income $ 5,668 $ 9,970 $ 9,903 ------- ------- ------- Net income (loss) per share of common stock: Continuing operations .76 1.10 1.07 Discontinued operation (.05) --- --- ------- ------- ------- Net income per share of common stock $ .71 $1.10 $1.07 ------- ------- ------- Weighted average common shares outstanding 8,065 9,093 9,224 ------- ------- -------
See accompanying notes to consolidated financial statements PAGE 19 INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, ---------------------------------- 1995 1996 --------------- ----------------- (In thousands, except share and ASSETS per share amounts) - ------ Current assets: Cash and cash equivalents $ 3,559 $ 570 Securities held to maturity 3,468 --- Trade receivables 11,902 16,157 Inventories: Raw materials 8,581 9,397 Work in process 3,802 3,627 Finished goods 3,224 4,839 ------- -------- Total inventories 15,607 17,863 ------- -------- Prepaid expenses 818 635 Deferred income taxes 1,557 1,467 ------- -------- Total current assets 36,911 36,692 ------- -------- Property, plant and equipment, at cost: Land 619 1,163 Building and improvements 10,444 10,924 Equipment 57,636 64,362 Construction in progress 6,388 17,194 ------- -------- 75,087 93,643 Less accumulated depreciation 16,323 21,826 ------- -------- Net property, plant and equipment 58,764 71,817 ------- -------- Other assets 2,269 6,952 ------- -------- $97,944 $115,461 ------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Notes payable to banks --- 16,292 Current installments of long-term debt 1,697 1,674 Trade accounts payable 8,011 8,126 Accrued compensation and benefits 1,085 338 Payable to Fujicopian Co., Ltd., a related party 1,853 1,184 Other accrued expenses 1,467 1,132 Income taxes payable 1,285 --- ------- -------- Total current liabilities 15,398 28,746 Long-term debt, excluding current installments 3,940 2,259 Deferred income taxes 4,917 6,336 ------- -------- Total liabilities 24,255 37,341 ------- -------- Commitments (Note 8) Stockholders' equity: Preferred stock; $.01 par value; 5,000,000 shares authorized; none issued --- --- Common stock; $.01 par value; 30,000,000 shares authorized; 8,731,479 and 8,860,301 shares issued as of March 31, 1995 and 1996, respectively 87 89 Additional paid-in capital 53,906 53,037 Unearned compensation - restricted stock awards (915) (692) Notes receivable from exercise of stock options and warrants (1,880) (1,219) Retained earnings 22,491 32,394 Treasury stock, 310,400 shares, at cost --- (5,489) ------- -------- Total stockholders' equity 73,689 78,120 ------- -------- $97,944 $115,461 ------- --------
See accompanying notes to consolidated financial statements PAGE 20 INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31, ------------------------------- 1994 1995 1996 --------- --------- --------- (In thousands) Cash flows from operating activities: Net income $ 5,668 $ 9,970 $ 9,903 -------- -------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,604 4,520 6,251 Loss on disposal of discontinued operation 421 --- --- Deferred income taxes 1,561 2,172 2,360 Other noncash expenses 55 310 444 Reduction in income taxes payable from the exercise of options and warrants 1,102 1,969 1,464 Cash provided (used) by changes in: Trade receivables (4,023) (675) (4,418) Inventories (2,232) (4,939) (2,256) Prepaid expenses (85) (236) 183 Other assets 169 (7) 50 Trade accounts payable 191 2,956 (1,052) Accrued compensation and benefits (83) 134 (747) Payable to Fujicopian Co., Ltd. 75 966 (674) Other accrued expenses (122) 460 (335) Income taxes payable (645) 1,285 (1,285) -------- -------- -------- Total adjustments (12) 8,915 (15) -------- -------- -------- Net cash provided by operating activities 5,656 18,885 9,888 -------- -------- -------- Cash flows used in investing activities: Capital expenditures (13,435) (14,235) (17,477) Payments to acquire other assets --- --- (5,575) Purchases of securities --- (4,468) (22) Maturities of securities --- 1,000 3,490 -------- -------- -------- Net cash used in investing activities (13,435) (17,703) (19,584) -------- -------- -------- Cash flows from financing activities: Proceeds from sale of common stock 27,237 83 102 Purchase of treasury stock --- --- (5,576) Exercise of stock options and warrants: Proceeds 2,551 1,013 409 Notes received from officers and director --- (1,996) (2,816) Proceeds from (repayments of) notes payable to banks (760) --- 16,292 Proceeds from long-term debt 2,048 --- --- Repayments of long-term debt (18,684) (1,712) (1,704) -------- -------- -------- Net cash provided by (used in) financing activities 12,392 (2,612) 6,707 -------- -------- -------- Net increase (decrease) in cash and cash equivalents 4,613 (1,430) (2,989) Cash and cash equivalents at beginning of year 376 4,989 3,559 -------- -------- -------- Cash and cash equivalents at end of year $ 4,989 $ 3,559 $ 570 -------- -------- -------- Supplemental disclosure of cash flow information: Cash paid during the year for: Interest, net of amount capitalized 707 218 151 Income taxes $ 1,704 $ 311 $ 3,044 -------- -------- -------- Supplemental disclosure of noncash investing and financing activities: Increase (decrease) in liabilities incurred in connection with capital expenditures (661) 528 1,172 Notes received from exercise of stock options and warrants --- 1,880 548 Common stock surrendered --- --- 4,909 Issuance of restricted common stock $ 537 $ 292 $ 58 -------- -------- --------
See accompanying notes to consolidated financial statements PAGE 21 INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Notes Receivable From Exercise Additional of Stock Total Common Paid-in Unearned Options Retained Treasury Stockholders' Stock Capital Compensation & Warrants Earnings Stock Equity ------- ----------- ------------- ----------- -------- --------- -------------- (In thousands, except share amounts) Balance at March 31, 1993 $54 $15,372 $(337) $ --- $ 6,853 $ (104) $21,838 Sale of 2,178,416 common shares 22 27,215 --- --- --- --- 27,237 Exercise of options and warrants: Shares issued, 487,859 5 2,546 --- --- --- --- 2,551 Tax benefit --- 1,772 --- --- --- --- 1,772 Restricted stock awards: Shares issued, 32,021 --- 537 (537) --- --- --- --- Compensation earned --- --- 44 --- --- --- 44 Net income --- --- --- --- 5,668 --- 5,668 ------ ------- ------------ ---------- -------- -------- ------- Balance at March 31, 1994 81 47,442 (830) --- 12,521 (104) 59,110 Exercise of options and warrants: Shares issued, 630,566 6 2,887 --- --- --- --- 2,893 Tax benefit --- 3,306 --- --- --- --- 3,306 Notes received --- --- --- (1,880) --- --- (1,880) Restricted stock awards: Shares issued, 12,000 --- 292 (292) --- --- --- --- Compensation earned --- --- 207 --- --- --- 207 Net income --- --- --- --- 9,970 --- 9,970 Other --- (21) --- --- --- 104 83 ------ ------- ------------ ---------- -------- -------- ------- Balance at March 31, 1995 87 53,906 (915) (1,880) 22,491 --- 73,689 Exercise of options and warrants: Shares issued, 319,081 3 1,648 --- --- --- 87 1,738 Tax benefit --- 2,116 --- --- --- --- 2,116 Shares surrendered, 197,345 (1) (4,908) --- 1,209 --- --- (3,700) Notes received --- --- --- (548) --- --- (548) Restricted stock awards: Shares issued, 2,400 --- 58 (58) --- --- --- --- Tax benefit --- 197 --- --- --- --- 197 Compensation earned --- --- 281 --- --- --- 281 Purchase of 315,400 treasury shares --- --- --- --- --- (5,576) (5,576) Net income --- --- --- --- 9,903 --- 9,903 Other --- 20 --- --- --- --- 20 ------ ------- ------------ ---------- -------- -------- ------- Balance at March 31, 1996 $89 $53,037 $(692) $(1,219) $32,394 $(5,489) $78,120 ------ ------- ------------ ---------- -------- -------- -------
See accompanying notes to consolidated financial statements PAGE 22 INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 1994, 1995 AND 1996 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES International Imaging Materials, Inc. and subsidiaries (the "Company") manufactures and sells thermal transfer ribbons used in non-impact thermal transfer printers. The Company's customers are primarily printer manufacturers and distributors in North America. A summary of significant accounting policies follows: (a) Principles of Consolidation The consolidated financial statements include the financial statements of International Imaging Materials, Inc. and its two wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. (b) Cash Equivalents Cash equivalents consist of money market funds, repurchase agreements and commercial paper with original maturities of ninety days or less. (c) Inventories Inventories are stated at the lower of cost (first-in, first-out) or market. (d) Depreciation and Amortization Depreciation of plant and equipment is calculated using the straight-line method over the estimated useful lives of the assets. Intangibles included in other assets are amortized using an accelerated method over the period of expected benefit. (e) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and restriction on the use of certain State investment tax credits in assessing the realizability of deferred tax assets. (f) Earnings Per Share Weighted average common shares outstanding include common stock equivalents which consist of the aggregate dilutive effect of unexercised stock options, warrants and restricted stock awards. (g) 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. All balance sheet amounts denominated in foreign currencies are translated at the current exchange rate as of the balance sheet date. Transaction gains and losses are included in earnings. INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (h) Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (2) INDEBTEDNESS The Company maintains a $20,000,000 line of credit with a bank which bears interest at either the LIBOR rate plus .20%, the bank's cost of funds rate plus .50%, or the prime rate, as selected by the Company. In addition, the Company maintains a $10,000,000 line of credit with another bank which bears interest at either the LIBOR rate plus .20%, the Federal Funds rate plus .50%, or a fixed rate to be determined by the bank, as selected by the Company. Advances under both lines of credit are at the sole discretion of the banks and can be made for various periods of time not extending beyond September 30, 1997 under the $20,000,000 line of credit, nor beyond March 31, 1997 under the $10,000,000 line of credit. There were no borrowings outstanding under either line of credit at March 31, 1995. There was $9,500,000 outstanding under the $20,000,000 facility at 5.64% and $6,792,000 outstanding on the $10,000,000 facility at 5.55% at March 31, 1996. Borrowings under both facilities are payable on demand. A summary of long-term debt follows:
Interest Rate at March 31, March 31, ------------------- 1996 1995 1996 ---- ------ ------ (In thousands) Term loans, due in: 1997 7.75% $1,215 $ 631 1998 7.75 3,493 2,562 2001 8.25 774 647 Other 2.50 to 4.00% 155 93 ------ ------ Total long-term debt 5,637 3,933 Less current installments 1,697 1,674 ------ ------ Long-term debt, excluding current installments $3,940 $2,259 ------ ------
The term loans, payable in monthly installments ranging from $11,000 to $78,000, bear interest at variable rates based on the prime rate, are secured by certain plant and equipment, require the maintenance of certain financial ratios, limit the amount of capital expenditures and prohibit the payment of cash dividends without the lenders' consent. PAGE 23 The aggregate annual installments due on long-term debt for each of the next five years are: $1,674,000 in fiscal 1997, $1,155,000 in fiscal 1998, $838,000 in fiscal 1999, $127,000 in fiscal 2000 and $127,000 in fiscal 2001. INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED The Company capitalizes interest as a component of the cost of plant and equipment. The following is a summary of interest costs incurred:
Years Ended March 31, --------------------- 1994 1995 1996 ------ ------ ----- (In thousands) Interest cost capitalized $ 152 $ 235 $ 612 Interest cost charged to income 639 284 136 ----- ----- ----- Total interest cost incurred $ 791 $ 519 $ 748 ----- ----- -----
The 2001 term loan and the $20,000,000 line of credit are with a bank that owns warrants to purchase 50,000 shares of the Company's common stock. The carrying amount of the Company's long-term debt instruments approximates the fair value of such instruments based upon management's best estimate of interest rates that would be available to the Company for similar debt obligations at March 31, 1996. (3) STOCKHOLDERS' EQUITY The Company has two stock plans under which non-qualified stock options and restricted stock have been granted to employees. The Company has also granted non-qualified stock options and restricted stock under an outside director stock option and restricted stock plan. All of the options granted under the plans were granted at the fair market value of the Company's common stock at the date of grant. All options granted under the plans expire no later than ten years and one day after grant. The following table summarizes option activity under these plans:
Years Ended March 31, ------------------------------------------------------ 1994 1995 1996 ---------------- ---------------- ------------------ Options outstanding, beginning of year 1,710,187 1,663,270 1,561,274 Granted 379,822 290,946 589,610 Exercised (395,739) (388,942) (301,881) Canceled (31,000) (4,000) (241,000) --------------- --------------- ----------------- Options outstanding, end of year 1,663,270 1,561,274 1,608,003 Shares reserved under the stock plans 279,970 685,220 389,820 --------------- --------------- ----------------- Total reserved shares 1,943,240 2,246,494 1,997,823 --------------- --------------- ----------------- Options exercisable at year end 1,120,381 893,617 707,663 --------------- --------------- ----------------- Option prices per share: Granted $14.00 - $20.13 $17.00 - $26.50 $16.875 - $26.875 Exercised $3.20 - $5.00 $3.20 - $19.75 $5.00 - $19.75 --------------- --------------- -----------------
During fiscal 1994, stockholders adopted an employee stock purchase plan which allows the purchase by employees, not holding options, of up to 200,000 shares of the Company's common stock at 85% of the fair market value of the shares at the time of purchase. As of March 31, 1995 and 1996, 4,369 and 9,055 shares, respectively had been issued under this plan. INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED Additionally, the Company has warrants outstanding as follows:
Years Ended March 31, --------------------------------- 1994 1995 1996 ---- ---- ---- Warrants outstanding 365,460 119,640 102,440 ------- ------- ------- Warrants exercisable 305,460 79,640 82,440 ------- ------ ------ Exercise price $5.00 - $10.00 $5.00 - $10.00 $5.00 - $10.00 -------------- -------------- --------------
During fiscal 1995 and 1996, the Company loaned $3,876,000 and $3,364,000, respectively to certain officers and a director, of which $1,880,000 and $548,000 funded the exercise price of stock options and warrants and $1,996,000 and $2,816,000 funded the officers and director's personal income tax liabilities related to the exercise. In fiscal 1996, $4,210,000 of these loans were repaid through the surrender of shares of the Company's common stock. It is the intention of the Company to allow repayment of these demand notes, which are collateralized by the assets of the respective officers, beyond March 31, 1997. (4) INCOME TAXES
Income tax expense is reflected in the statements of income as follows:
Years Ended March 31, --------------------------------- 1994 1995 1996 -------- -------------- ------- (In thousands) Expense attributable to income from continuing operations $3,590 $6,110 $5,333 Benefit resulting from loss from discontinued operation (255) --- --- ------ ------ ------- Total income tax expense $3,335 $6,110 $5,333 ------ ------ ------- The above income tax expense consists of the following: Years Ended March 31, -------------------------------- 1994 1995 1996 ------ ------ ------- (In thousands) Current: Federal $1,450 $3,411 $2,662 State 324 527 313 ------ ------ ------- 1,774 3,938 2,975 ------ ------ ------- Deferred: Federal 1,523 2,172 2,358 State 38 --- --- ------ ------ ------- 1,561 2,172 2,358 ------ ------ ------- Total income tax expense $3,335 $6,110 $5,333 ------ ------ -------
PAGE 24 INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED Income tax expense differs from the expected amount (computed by applying the 34% statutory rate to income before income taxes from both continuing and discontinued operations) due principally to the effects of the Company's foreign sales corporation, state income taxes and changes in the valuation allowance for deferred tax assets. The tax effects of temporary differences that give rise to the deferred tax assets and liability at March 31, 1995 and 1996 were as follows:
March 31, ------------------- 1995 1996 -------- --------- (In thousands) Deferred tax assets: Investment tax and other credit carryforwards $ 2,613 $ 3,384 Alternative minimum tax credit carryforwards 3,984 3,781 Capitalized inventory costs 654 581 Other 480 672 ------- -------- Total gross deferred tax asset 7,731 8,418 Valuation allowance (2,388) (2,695) ------- -------- Net deferred tax asset 5,343 5,723 Deferred tax liability - depreciation of plant and equipment (8,703) (10,592) ------- -------- Net deferred tax liability $(3,360) $ (4,869) ------- --------
The above net deferred tax liability is reflected in the balance sheets as follows:
March 31, ------------------ 1995 1996 -------- -------- (In thousands) Current deferred tax asset $ 1,557 $ 1,467 Noncurrent deferred tax liability, net (4,917) (6,336) ------- ------- Net deferred tax liability $(3,360) $(4,869) ------- -------
In fiscal 1994, 1995 and 1996, 487,859, 630,566 and 319,081 shares of common stock, respectively, were issued through the exercise of non-qualified stock options and compensatory warrants. In addition, in fiscal 1996, restrictions lapsed on 41,900 shares of common stock. The total tax benefit to the Company from these transactions, which is credited to additional paid-in capital, rather than recognized as a reduction of income tax expense, was $1,772,000, $3,306,000 and $2,313,000 in fiscal 1994, 1995 and 1996, respectively. Those benefits were recognized in the balance sheets as follows:
Years Ended March 31, ---------------------- 1994 1995 1996 ------ ------ ------ (In thousands) Reduction in: Income taxes payable $1,102 $1,969 $1,464 Deferred income taxes 670 1,337 849 ------ ------ ------ Credit to additional paid-in capital $1,772 $3,306 $2,313 ------ ------ ------
INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED At March 31, 1996, the Company's investment tax and other credits ($174,000 Federal and $4,862,000 State) expire from 2001 to 2012. The Company also has $3,553,000 of Federal and $345,000 of State alternative minimum tax credit carryforwards available with no expiration date. (5) OTHER ASSETS Other assets include $5,575,000 paid to QMS, Inc. in fiscal 1996 for the rights to sell thermal transfer supplies directly to the customers of QMS, Inc. under the QMS, Inc. brand name. The purchase price was allocated to the various service and consulting arrangements, customer records and other agreements acquired in this transaction. Amortization of the cost of the acquired assets was $655,000 in fiscal 1996. (6) RELATIONSHIP WITH FUJICOPIAN CO., LTD. The Company manufactures thermal transfer ribbons pursuant to a license agreement with Fujicopian Co., Ltd. which expires in 2008. Royalty expenses under the agreement are generally equal to 3% of total revenues from substantially all thermal transfer ribbons and totaled $1,911,000, $2,627,000 and $2,681,000 in fiscal 1994, 1995 and 1996, respectively. The payable to Fujicopian Co., Ltd. includes royalties due of $687,000 and $732,000 as of March 31, 1995 and 1996, respectively. The Company also purchased certain materials from Fujicopian which totaled $3,925,000, $4,579,000 and $3,040,000 in fiscal 1994, 1995 and 1996, respectively. The Company believes that the costs of such purchases are competitive with alternative sources of supply. At March 31, 1996, Fujicopian owned 300,300 shares of the Company's common stock. (7) RETIREMENT SAVINGS PLAN The Company has a defined contribution retirement savings plan qualified under Section 401(k) of the Internal Revenue Code. Pursuant to the plan, employees make voluntary contributions which are partially matched by the Company. Expenses under the Plan were $415,000, $555,000 and $639,000 in fiscal 1994, 1995 and 1996, respectively. (8) COMMITMENTS At March 31, 1996, commitments for construction of an additional manufacturing facility and the purchase of equipment totaled $4,479,000. Additionally, the Company had contracted to buy certain raw materials for $10,929,000. Rent expense under operating leases for certain buildings and equipment was $223,000, $253,000 and $270,000 in fiscal PAGE 25 1994, 1995 and 1996, respectively. Minimum annual payments due under these leases are $214,000 in fiscal 1997, $143,000 in fiscal 1998, $130,000 in fiscal 1999, $132,000 in fiscal 2000 and in fiscal 2001 and a total of $559,000 thereafter. (9) SIGNIFICANT CUSTOMERS Sales to significant customers were: $7,270,000 and $7,118,000 to separate customers in fiscal 1994, $10,282,000 to one customer in fiscal 1995, and $11,859,000 and $9,599,000 to separate customers in fiscal 1996. In addition, export sales in the aggregate were $9,576,000 and $9,753,000 in fiscal 1995 and 1996, respectively. INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED (10) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Selected quarterly financial data for 1995 and 1996 are as follows:
Year Ended March 31, 1995 --------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter --------- ------------- ------------ ----------- (In thousands, except per share amounts) Revenues $19,816 $21,409 $21,941 $22,311 Gross profit 5,782 6,306 6,601 6,820 Net income $ 2,150 $ 2,451 $ 2,631 $ 2,738 ------- ------- ------- ------- Net income per share of common stock $ .24 $ .27 $ .29 $ .30 ------- ------- ------- ------- Year Ended March 31, 1996 --------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter --------- ------------- ------------ ----------- (In thousands, except per share amounts) Revenues $19,001 $21,223 $24,018 $24,206 Gross profit 5,417 6,209 7,306 7,263 Net income $ 1,831 $ 2,213 $ 2,865 $ 2,994 ------- ------- ------- ------- Net income per share of common stock $ .20 $ .24 $ .31 $ .34 ------- ------- ------- -------
(11) ACCOUNTING PRONOUNCEMENTS The Company is required to adopt Statements of Financial Accounting Standards Nos. 121 (Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of) and 123 (Accounting for Stock Based Compensation) in fiscal 1997. The Company does not believe that the adoption of either standard will have a material effect on the consolidated financial statements. With respect to FAS 123, the Company does not expect to adopt the fair value accounting provisions of the standard in favor of the disclosure alternative. PAGE 26 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders International Imaging Materials, Inc.: We have audited the accompanying consolidated balance sheets of International Imaging Materials, Inc. and subsidiaries as of March 31, 1995 and 1996, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three-year period ended March 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of International Imaging Materials, Inc. and subsidiaries as of March 31, 1995 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 1996, in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP - ----------------------------------------- KPMG PEAT MARWICK LLP Buffalo, New York April 24, 1996 PAGE 28 COMMON STOCK INFORMATION International Imaging Materials, Inc.'s common stock is traded on The Nasdaq Stock Market under the symbol IMAK. The Company has never paid dividends on its common stock nor does it expect to pay dividends in the foreseeable future. There were 308 shareholders of record and approximately 3,500 beneficial holders of the Company's common stock at March 31, 1996. The following table sets forth the high and low sales prices of the Company's common stock for fiscal 1995 and 1996.
YEAR ENDED MARCH 31, 1995: - -------------------------- Price ---------------- Quarter Ended High Low - ------------------------------------------------------ July 5, 1994 $20.250 $15.000 October 4, 1994 $25.000 $18.500 January 3, 1995 $33.750 $21.875 March 31, 1995 $30.500 $25.250 YEAR ENDED MARCH 31, 1996: - -------------------------- Price ---------------- Quarter Ended High Low - ------------------------------------------------------ July 4, 1995 $29.250 $21.750 October 3, 1995 $27.375 $18.000 January 2, 1996 $28.500 $19.938 March 31, 1996 $26.000 $16.250
EX-21 8 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 INTERNATIONAL IMAGING MATERIALS, INC. SUBSIDIARIES Name: International Imaging Materials FSC Ltd. Jurisdiction of Incorporation: U.S. Virgin Islands Name: IIMAK DRM, Inc. Jurisdiction of Incorporation: Delaware EX-23 9 CONSENT OF KPMG PEAT MARWICK Exhibit 23 Independent Auditor's Consent ----------------------------- The Board of Directors International Imaging Materials, Inc.: We consent to incorporation by reference in the registration statement (No. 33- 71716) on Form S-8 of International Imaging Materials, Inc. of our reports dated April 24, 1996, relating to the consolidated balance sheets of International Imaging Materials, Inc. and subsidiaries as of March 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended March 31, 1996, and related schedule, which reports appear in or are incorporated by reference in the March 31, 1996 annual report on Form 10-K of International Imaging Materials, Inc. /s/ KPMG Peat Marwick LLP ----------------------------------------- KPMG Peat Marwick LLP Buffalo, New York June 13, 1996 EX-27 10 FINANCIAL DATA SCHEDULE
5 1,000 YEAR MAR-31-1996 MAR-31-1996 570 0 16,157 0 17,863 36,692 93,643 21,826 115,461 28,746 2,259 0 0 89 78,031 115,461 88,448 88,448 62,253 62,253 10,924 0 35 15,236 5,333 9,903 0 0 0 9,903 1.07 1.07
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