FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-7190
------
IMPERIAL INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 65-0854631
- --------------------------------------------------------------------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1259 Northwest 21ST Street, Pompano Beach Florida 33069-4114
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954)917-4114
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 the number of shares of Imperial Industries, Inc. Common Stock
($.01 par value) outstanding as of August 2, 1999: 8,182,571
Total number of pages contained in this document: 27
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Index
Page No.
--------
Part I. Financial Information
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998 3
Consolidated Statements of Operations
Six Months and Three Months Ended June 30, 1999
and 1998 4
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998 5-6
Notes to Consolidated Financial Statements 7-18
Management's Discussion and Analysis of Results
of Operations and Financial Conditions 19-24
Part II. Other Information and Signatures
Item I. Legal Proceedings 25
Item 6. Exhibits and Reports on Form 8-K 25
Signatures 27
2
<PAGE>
<TABLE>
<CAPTION>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, December 31,
Assets 1999 1998
------ ---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 883,000 $ 1,097,000
Trade accounts receivable (less
allowance for doubtful accounts of
$286,000 in 1999 and $200,000 in 1998) 3,031,000 2,535,000
Inventories 1,894,000 1,374,000
Deferred taxes 268,000 505,000
Other current assets 297,000 15,000
-------------- -------------
Total current assets 6,373,000 5,526,000
-------------- -------------
Property, plant and equipment, at cost 2,742,000 2,517,000
Less accumulated depreciation (1,238,000) (1,182,000)
-------------- -------------
Net property, plant and equipment 1,504,000 1,335,000
-------------- -------------
Deferred taxes 615,000 615,000
-------------- -------------
Other assets 82,000 85,000
-------------- -------------
$ 8,574,000 $ 7,561,000
============== =============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Notes payable $ 1,981,000 $ 780,000
Current portion of long-term debt 138,000 123,000
Accounts payable 1,238,000 1,300,000
Payable to stockholders 48,000 733,000
Accrued expenses and other liabilities 228,000 151,000
-------------- -------------
Total current liabilities 3,633,000 3,087,000
-------------- -------------
Long-term debt, less current maturities 1,342,000 1,316,000
-------------- -------------
Obligation for appraisal rights 877,000 877,000
-------------- -------------
Commitments and contingencies -- --
-------------- -------------
Stockholders' equity:
Preferred stock, $.01 par value 5,000,000
shares authorized; none issued
Common stock, $.01 par value 20,000,000
shares authorized; 8,182,571 issued at
June 30, 1999 and December 31, 1998
respectively 82,000 82,000
Additional paid-in-capital 13,507,000 13,507,000
Accumulated deficit (10,761,000) (11,202,000)
-------------- -------------
2,828,000 2,387,000
Less cost of shares in treasury (47,863
shares at June 30, 1999 and December 31, 1998) (106,000) (106,000)
-------------- -------------
Total stockholders' equity 2,722,000 2,281,000
-------------- -------------
$ 8,574,000 $ 7,561,000
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
-------- --------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 11,818,000 $ 8,785,000 $ 6,080,000 $ 4,674,000
Cost of sales 8,065,000 5,851,000 4,062,000 3,060,000
------------- ------------- ------------ -------------
Gross profit 3,753,000 2,934,000 2,018,000 1,614,000
Selling, general and
administrative expenses 2,891,000 2,186,000 1,520,000 1,140,000
------------- ------------- ------------ -------------
Operating income 862,000 748,000 498,000 474,000
------------- ------------- ------------ -------------
Other income (expense):
Interest expense (187,000) (137,000) (103,000) (73,000)
Miscellaneous income 3,000 86,000 1,000 15,000
------------- ------------- ------------ -------------
(184,000) (51,000) (102,000) (58,000)
------------- ------------- ------------ -------------
Income before income taxes 678,000 697,000 396,000 416,000
Provision for income taxes (237,000) (244,000) (138,000) (146,000)
------------- ------------- ------------ -------------
Net income 441,000 453,000 258,000 270,000
Less: Dividends on redeemable
preferred stock -- (165,000) -- (82,000)
------------- ------------- ------------ -------------
Net income applicable to
common stockholders $ 441,000 $ 288,000 $ 258,000 $ 188,000
============= ============= ============ =============
Basic earnings per common share $ .05 $ .04 $ .03 $ .03
============= ============= ============ =============
Weighted average number of
common shares outstanding 8,182,571 6,515,519 8,182,571 6,546,730
============= ============= ============ =============
Diluted earnings per common share $ .05 $ .04 $ .03 $ .03
============= ============= ============ =============
Weighted average number of common and
potentially dilutive shares outstanding 8,344,766 6,679,086 8,357,571 6,708,828
============= ============= ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Increase (Decrease) In Cash and Cash Equivalents
Six Months Ended
June 30,
--------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 441,000 $ 453,000
------------ ------------
Adjustments to reconcile net income
to net cash provided by:
Depreciation 104,000 83,000
Amortization 7,000 9,000
Debt issue discount 30,000 --
Provision for doubtful accounts 87,000 38,000
Provision for income taxes 237,000 244,000
Compensation expense - issuance of stock -- 32,000
Loss (gain) on disposal of property
and equipment 6,000 (3,000)
(Increase) decrease in:
Accounts receivable (583,000) (909,000)
Inventory (520,000) (308,000)
Prepaid expenses and other assets (286,000) (171,000)
Increase (decrease) in:
Accounts payable (62,000) 489,000
Payable to stockholders (685,000) --
Accrued expenses and other liabilities 77,000 41,000
------------ ------------
Total adjustments to net income (1,588,000) (455,000)
------------ ------------
Net cash (used in) operating
activities (1,147,000) (2,000)
------------ ------------
Cash flows from investing activities
Purchase of property, plant
and equipment (300,000) (432,000)
Proceeds from sale of property
and equipment 21,000 13,000
Proceeds from exercise of stock options -- 2,000
------------ ------------
Net cash used in investing activities (279,000) (417,000)
------------ ------------
Cash flows from financing activities
Increase (decrease) in notes
payable banks - net 1,201,000 239,000
Proceeds from issuance of long-term debt 100,000 275,000
Repayment of long-term debt (89,000) (105,000)
------------ ------------
Net cash provided by financing activities 1,212,000 409,000
------------ ------------
Net decrease in cash and cash equivalents (214,000) (10,000)
Cash and cash equivalents
beginning of period 1,097,000 552,000
------------ ------------
Cash and cash equivalents end of period $ 883,000 $ 542,000
============ ============
</TABLE>
5
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Increase (Decrease) In Cash and Cash Equivalents
-continued-
Six Months Ended
June 30,
--------
1999 1998
---- ----
Supplemental disclosure
of cash flow information:
Cash paid during the six months for:
Interest $119,000 $136,000
======== =========
Non-cash transactions:
During the six months ended June 30, 1998,
58,333 (shares vested under the Company's
Restricted Stock Plan) and 124,000 shares of
Common Stock were issued to directors
and employees of the Company. $ - $ 32,000
======== =========
See accompanying notes to consolidated financial statements.
6
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Interim Financial Statements
----------------------------
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included. Operating results for the six months
ended June 30, 1999 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1999. The significant
accounting principles used in the preparation of these interim financial
statements are the same as those used in the preparation of the annual
audited consolidated financial statements. These statements should be read
in conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31,
1998.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(2) Merger
------
On December 17, 1998, the Company's stockholders approved a Plan
merging Imperial Industries, Inc. into Imperial Merger Corp., a
newly-formed, wholly-owned subsidiary of the Company, (the "Merger") with
the Merger becoming effective December 31, 1998,, (the "Effective Date").
On the Effective Date, Imperial Merger Corp. changed its name to Imperial
Industries, Inc., (the "Company").
At the Effective Date, each share of the Company's $.10 par value
common stock outstanding before the Merger was converted into one share of
$.01 par value common stock resulting in the recapitalization of $599,000
from common stock to additional paid-in-capital. Also at the Effective
Date, 300,121 outstanding shares of preferred stock, with a carrying value
of $3,001,000 were retired and $4,292,000 of accrued dividends on such
shares, were eliminated as described in the following paragraphs.
Holders of 219,021 shares of the preferred stock retired (the
"Exchanging Shareholders"), with a carrying value of $2,190,000, elected
to convert their shares into either (a) $4.75 in cash and ten shares of
the Company's common stock, or (b) $2.25 in cash, an 8% three-year $8.00
subordinated debenture and five shares of the Company's common stock. In
connection with the Exchanging Shareholders
7
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
-continued-
(2) Merger (continued)
------
election, the Company was required to pay cash of $733,000 which was
presented as Payable to Stockholders in the accompanying consolidated
balance sheet at December 31, 1998. The Company was also required to issue
$985,000 face value of 8% subordinated debentures with a fair value of
$808,000, and 1,574,610 shares of $.01 par common stock with a fair value
of $630,000 based on the market price of $.40 per share of the Company's
common stock at the Effective Date. The total fair value of the cash,
debentures and common stock to be exchanged with the Exchanging
Shareholders was $2,171,000. Had the Exchanging Shareholders elected to
convert their shares under the provisions of the preferred stock's
governing instrument, they would have received 251,655 shares of common
stock with a fair value of $101,000. The excess of the total fair value of
cash, debentures and common stock to be exchanged with the Exchanging
Shareholders, over the fair value which the Exchanging Shareholders would
have received under the preferred stock's original conversion provisions
represented a conversion charge of $2,070,000 to accumulated deficit and a
reduction in net income applicable to common stockholders in the
consolidated statement of operations for the year ended December 31, 1998.
In addition, conversion of the 219,021 preferred shares resulted in a
credit to additional paid-in capital of $5,835,000.
Holders of 81,100 shares of preferred stock (the "Dissenting
Shareholders"), with a carrying value of $811,000, elected to exercise
their appraisal rights with respect to the stock. Under Delaware law, the
Dissenting Shareholders are entitled to petition the Delaware Chancery
Court to determine the fair value of their shares at the Effective Date,
exclusive of any element of value attributable to the Merger. In the event
that a Dissenting Shareholder did not perfect his appraisal rights, each
such share would be entitled to receive the cash, the $8.00 subordinated
debenture and the five shares of common stock described under option (b)
in the preceding paragraph. Based on these facts, and a valuation prepared
by an independent financial advisor in connection with the Merger, the
Company recorded $877,000 in the accompanying consolidated balance sheet
at December 31, 1998, and June 30, 1999, as an estimate for the obligation
for appraisal rights. The Chancery Court may determine fair value is less
than, equal to, or greater than an aggregate of $877,000. In addition,
elimination of the 81,100 preferred shares and accrued dividends on such
shares resulted in a credit to accumulated deficit, and an addition to net
income applicable to common stockholders of $1,095,000 at December 31,
1998.
At June 30, 1999 cash payable to stockholders was reduced to $48,000
from $733,000 at December 31, 1998, as a result of satisfying the cash
requirements due to Exchanging Shareholders who had submitted their
preferred stock to the Company for the merger consideration.
8
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
-continued-
(2) Merger (continued)
------
On April 27, 1999, certain Dissenting Shareholders filed a petition
for appraisal in the Delaware Chancery Court to determine the fair value
of their shares at the Effective Date.
In connection with the Merger, all outstanding stock purchase warrants
were converted into warrants with identical terms exerciseable for shares
of the Company's common stock.
Also, in connection with the Merger, the Company issued 150,000
common stock purchase warrants to its investment banker, exercisable at
$.38 per share until December 31, 2003. Costs of the Merger aggregated
approximately $456,000 and were charged to the 1998 Consolidated Statement
of Operations.
(3) Revenue Recognition Policy
--------------------------
Revenue from sale transactions is recorded upon shipment and delivery
of inventory to the customer, net of discounts and allowances.
(4) Cash Equivalents
----------------
The Company has defined cash and cash equivalents as those highly
liquid investments with a maturity of three months or less when purchased.
Included in cash and cash equivalents at June 30, 1999 and December 31,
1998 are short term time deposits of $271,000 and $267,000, respectively.
(5) Income Tax Policy
-----------------
The Company has adopted the liability method for determining its
income taxes. Under this method, deferred tax assets and liabilities are
recognized for the expected future tax consequences of events that have
been recognized in the consolidated financial statements or income tax
return. Deferred tax assets and liabilities are measured using the enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be realized or settled; valuation
allowances are provided against assets that are not likely to be realized.
(6) Inventories
-----------
At June 30, 1999 and December 31, 1998, inventories consist of:
1999 1998
---- ----
Raw materials $ 436,000 $ 345,000
Finished goods 1,231,000 810,000
Packaging materials 227,000 219,000
---------- -----------
$1,894,000 $1,374,000
========== ===========
9
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
-continued-
(7) Notes Payable
-------------
Included in notes payable at June 30, 1999, is $1,981,000 which
represents the amount outstanding under a $3,000,000 line of credit from a
commercial lender to Premix-Marbletite Manufacturing Co. ("Premix") and
Acrocrete, Inc. ("Acrocrete"), the Company's two principal operating
subsidiaries. The line of credit is collateralized by Premix's and
Acrocrete's accounts receivable and inventory. The line of credit bears
interest at the lender's prime rate plus 2% (10% at August 2, 1999) and
expires June 19, 2000, subject to annual renewal. At June 30, 1999,
$1,981,000 had been borrowed under the line of credit. For the six months
ended June 30, 1999 and 1998, the maximum borrowings at any month end were
$1,981,000 and $1,127,000, respectively. The average month end amount
outstanding during the six month periods ended June 30, 1999 and 1998 were
$1,175,000 and $1,041,000, respectively.
(8) Long-Term Debt and Current Installments of Long-Term Debt
---------------------------------------------------------
Included in long-term debt at June 30, 1999, are two mortgage loans,
collateralized by real property, in the amounts of $301,000 and $143,000,
respectively, less current installments of $61,000. As of August 2, 1999,
the interest rates on such mortgage loans were 7 1/2% and 12%,
respectively.
In connection with the Merger described in Note 2, the Company issued
8% subordinated debentures with a face amount value of $984,960 effective
December 31, 1998. Each debenture was discounted to a value of $6.56 at
December 31, 1998 using an effective interest rate of 16%. The aggregate
carrying value of the debentures at June 30, 1999 is $837,000. The
debentures are general, unsecured obligations of the Company, subordinated
in right of payment to all indebtedness to institutional and other lenders
of the Company. The Debentures are subject to redemption, in whole or in
part, at the option of the Company, at any time at a redemption price of
100% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the redemption date. Interest is payable annually on July 1 of
each year with the principal balance due and payable December 31, 2001.
Other long-term debt in the aggregate amount of $199,000, less
current installments of $77,000, relates principally to equipment
financing. The notes bear interest at various rates ranging from 8.75% to
15.39% and are payable monthly through 2003.
10
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IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
-continued-
(9) Income Taxes and Tax Credit Carryforwards
-----------------------------------------
At June 30, 1999, the deferred tax asset of $883,000 primarily
consists of the tax effect of net operating loss carryforwards of
$9,200,000 less a valuation allowance of $2,200,000. Net operating losses
of approximately $6,700,000 expire thru 2000, the balance expires in
varying amounts through 2009.
During 1998, the Company recognized $927,000 of deferred tax assets
as a result of releasing a portion of the valuation allowance established
for the uncertainty of realizing net operating losses. The remaining
deferred tax assets are fully reserved at December 31, 1998. The ultimate
realization of the remaining deferred tax assets is largely dependent on
the Company's ability to generate sufficient future taxable income.
Management believes that the valuation allowance at June 30, 1999 and
December 31, 1998 is appropriate, given the cyclical nature of the
construction industry and other factors including but not limited to the
uncertainty of future taxable income expectations beyond the Company's
strategic planning horizon.
In the six months ended June 30, 1999 and 1998, the Company
recognized income tax expense of $237,000 and $244,000, respectively,
representing income before taxes at the statutory rate of 35%.
(10) Capital Stock
-------------
(a) Common Stock
------------
At June 30, 1999, the Company had outstanding 8,182,571 shares
(net of Treasury shares) of Common Stock $.01 par value per share
("Common Stock"). The holders of Common Stock are entitled to one
vote per share on all matters. In the event of liquidation, holders
of Common Stock are entitled to share ratably in all the remaining
assets of the Company, if any, after satisfaction of the liabilities
of the Company and the prior preferential rights of the holders of
outstanding preferred stock, if any.
Effective December 31, 1998, in connection with the Merger, the
Company's former Preferred Stockholders received 1,574,610 shares of
common stock and other consideration in exchange for their preferred
stock. See Note (2) Merger.
In May 1998, the Company issued from treasury an aggregate of
100,000 shares of common stock to its Directors as part of their
compensation for services rendered.
In April 1998, an aggregate of 24,000 shares of Common Stock
were issued to employees of the Company upon the exercise of
11
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
-continued-
(10) Capital Stock (continued)
-------------
stock options previously granted under the Company's stock option
plans. The Company received aggregate cash proceeds of $2,400.
(b) Preferred Stock
---------------
The authorized preferred stock of the Company consists of
5,000,000 shares, $.01 par value per share, none of which are issued
as of June 30, 1999. The preferred stock is issuable in series, each
of which may vary, as determined by the Board of Directors, as to the
designation and number of shares in such series, the voting power of
the holders thereof, the dividend rate, redemption terms and prices,
the voluntary and involuntary liquidation preferences, and the
conversion rights and sinking fund requirements, if any, of such
series.
(c) Redeemable Preferred Stock $1.10 Cumulative Convertible Series
--------------------------------------------------------------
Until December 31, 1998 the Company had issued and outstanding
300,121 shares of $1.10 cumulative convertible preferred stock
("Preferred Stock"). The holders of Preferred Stock were entitled to
one vote per share on all matters without regard to class, except
that the holders of Preferred Stock were entitled to vote as a
separate class with regard to the issuance of any equity securities
which ranked senior or on parity with the Preferred Stock, or to
change or repeal any of the express terms of the Preferred Stock in a
manner substantially prejudicial to the holders thereof. Each share
of Preferred Stock was entitled to cumulative quarterly dividends at
the rate of $1.10 per annum and was convertible into 1.149 shares of
Common Stock. The liquidation preference of the Preferred Stock was
$10.00 per share, plus accrued but unpaid dividends. The Preferred
Stock was callable, in whole or in part, by the Company at its option
at any time upon 30 days prior notice, at $11.00 per share, plus
accrued but unpaid dividends.
The Company had omitted dividends on its Preferred Stock since
the fourth quarter of 1985 aggregating $4,292,000 through September
30, 1998. The omission of Preferred Stock dividends was a reduction
in net income applicable to common stockholders and had been recorded
as non-current liabilities on the Company's consolidated balance
sheets.
The Preferred Stock was subject to redemption through a
mandatory sinking fund at a redemption price of $10.00 per share on
April 1 of each year. As a result, the Company was required to redeem
36,121 shares in 1991 and an additional 66,000 shares for each year
thereafter until all such shares of Preferred Stock was redeemed.
12
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
-continued-
(10) Capital Stock (continued)
-------------
(c) Redeemable Preferred Stock $1.10 Cumulative Convertible Series
--------------------------------------------------------------
(continued)
The Company did not redeem any shares of Preferred Stock as
required on April 1, 1991 or any year thereafter. Under the
provisions of the sinking fund requirements, if an annual sinking
fund requirement was not met, it was added to the requirements for
the next year.
The Company was prohibited from paying any cash dividends on
Common Stock and from purchasing or otherwise acquiring for value,
any shares of either Preferred or Common Stock, while the Company was
in default in the payment of any dividends on the Preferred Stock and
the sinking fund requirements were in arrears.
Effective December 31, 1998, all outstanding shares of Preferred
Stock were retired and all accumulated dividends were eliminated as a
result of the Merger.
(d) Warrants
--------
At June 30, 1999, the Company had the following outstanding series
of warrants:
(i) 200,000 warrants. Each warrant entitles the holder to purchase
one share of Common Stock at $.10 per share until June 29, 2000. Two
directors acquired 150,000 and 50,000 warrants, respectively, in
connection with a $400,000 financing in 1988. The loan has since been
repaid by the Company.
(ii) 150,000 warrants. In January 1999 the Company issued 150,000
warrants to its investment banker for financial advisory services in
connection with the Merger. Each warrant entitles the holder to
purchase one share of common stock until December 31, 2003 at $.38
per share.
(11) Earnings Per Share of Common Stock
----------------------------------
The Company has adopted Statement of Financial Accounting Standards
No. 128, Earnings Per Share ("FAS 128) which requires that dual
presentation of basic and diluted earnings per share for the years ending
after December 15, 1997. Basic earnings per common share is computed by
dividing net income, ("net income applicable to common stockholders"),
after deducting preferred stock dividends accumulated during the year by
the weighted average number of shares of common stock outstanding each
year. Diluted earnings per common share is
13
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
-continued-
(11) Earnings Per Share of Common Stock (continued)
----------------------------------------------
computed by dividing net income applicable to common stockholders by the
weighted-average number of shares of common stock and common stock
equivalents outstanding during each year. The difference between the
weighted average number of common shares outstanding and the weighted
average number of common and potentially dilutive shares outstanding for
the six month and three month periods are shares represented by
outstanding warrants at June 30, 1999.
(12) Commitments and Contingencies
-----------------------------
(a) Premix has not been a defendant in any asbestos lawsuits since
April 1996 when it was dismissed from 27 cases then pending in various
circuit courts in Alabama and Florida.
The Company and Premix are parties to an Interim Agreement with
certain of its insurance carriers under which each party agreed to pay
a negotiated percentage share of defense costs and indemnification
expenditures, subject to policy limits, for any pending and future
asbestos claims. While the Agreement expired on May 15, 1999, the
Company believes the Agreement can be reinstated, if necessary.
The insurance carriers have agreed to pay, in the aggregate,
approximately 93% of the damages, costs and expenditures related to any
asbestos related litigation. Premix is responsible for the remaining
7%.
The Company believes, based upon its experience in these claims to
date, it has adequate insurance coverage for any future similar type of
claims. To date, no case has gone to trial with Premix as a defendant.
Premix has either settled for a nominal amount of money or been
voluntarily dismissed without payment from approximately 193 cases.
Based upon historical results, the Company does not believe any
potential future claims would be material. However, there can be no
assurance that insurance will ultimately cover the aggregate liability
for damages to which Premix may be exposed. Premix is unable, at this
time, to determine the exact extent of its exposure or outcome of the
litigation of any other similar cases that may arise in the future.
Acrocrete was a co-defendant in a lawsuit captioned "Stephen P.
Zabow, II and Karen I. Zabow, et al. vs. M/I Schottenstein Homes, Inc.
("Schottenstein"), et al., Heiner Construction Company, and Acrocrete,
Inc.", filed October 2, 1996 in Wake County, North Carolina. The
lawsuit against Acrocrete and the other parties alleged negligent
misrepresentation, breach of warranty, fraud, unfair and deceptive
trade practices and requested punitive damages. In October 1997, the
plaintiffs voluntarily dismissed Acrocrete with prejudice as a result
of the plaintiffs' settlement with the general contractor defendant,
Schottenstein.
However, in October 1997, Schottenstein filed a lawsuit captioned
14
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
-continued-
(12) Commitments and Contingencies (continued)
-----------------------------
indemnity and/or contribution from Acrocrete, and other defendants, in
connection with its settlement with the Zabow plaintiffs as well as
other homeowners. The lawsuit involved claims by owners of 52 homes
constructed by Schottenstein, that the use of synthetic stucco in the
system construction of the exterior finish of their homes caused
moisture intrusion damage, to which Scottenstein received an assignment
of any claims which the homeowners may have against any other
contractors, subcontractors, material men, or suppliers. Based upon the
allegations, the Court severed this lawsuit into 52 separate actions.
Acrocrete's insurance carriers accepted coverage and were providing a
defense under a reservation of rights.
On October 6, 1998, Acrocrete, Schottenstein as well as all
codefendants, agreed to settle all pending claims. Acrocrete's insurers
paid $102,000 to Schottenstein's insurer, without contribution from
Acrocrete, in order to avoid the significant costs associated with
litigating these 52 actions. All of these actions were dismissed with
prejudice in the first quarter of 1999, as a result of Stipulations
which were executed and filed by all parties.
Twenty-six similar lawsuits are pending against Acrocrete and
other parties, (contractors and subcontractors), by homeowners, or
their insurance companies, claiming moisture intrusion damages on
single family residences.
The Company's insurance carriers have accepted coverage for
twenty-three of the above claims and are providing a defense under a
reservation of rights. The Company expects its insurance carriers to
accept coverage for the other three recently filed claims. Acrocrete is
vigorously defending all of these cases and believes it has meritorious
defenses, counter-claims and claims against third parties. Acrocrete is
unable to determine the exact extent of its exposure or outcome of
litigation of these lawsuits.
The allegations of defects in synthetic stucco wall systems are
not restricted to Acrocrete products but rather are an industry-wide
issue. There has never been any defect proven in any of the legal
actions discussed above and the alleged failure of these products to
perform has generally been linked to improper application and the
failure of adjacent building materials such as windows, roof flashing,
decking and the lack of caulking.
In response to the alleged defects and in compliance with modified
building codes adopted in North Carolina and Georgia. Acrocrete,
together with many other manufacturers of synthetic stucco wall
systems, has developed modified wall systems that allow the drainage of
incidental moisture that may enter the wall system. Most manufacturers
continue to produce the traditional (i.e., face-sealed) stucco systems
and in commercial construction, estimated to account for more than 50%
of product sales, the traditional system is still the product of
choice.
15
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
-continued-
(12) Commitments and Contingencies (continued)
-----------------------------
The alleged defects have occurred in the residential construction
market. To the Company's knowledge, in the commercial market, where
methods of construction and quality control are monitored more closely
than in the residential market, the alleged drainage problem has not
occurred.
On June 15, 1999, Premix was served with a complaint captioned
Mirage Condominium Association, Inc. v. Premix Marbletite Manufacturing
Co., et al., in Miami-Dade County Florida. The lawsuit raises a number
of allegations against 12 separate defendants involving alleged
construction defects. Plaintiffs have alleged only one count against
Premix, for Breach of Third Party Beneficiary of Contract, which claims
that certain materials, purportedly provided by Premix to the
Developer/Contractor and used to anchor balcony railings to the
structure were defective. The Company's insurance carrier has accepted
coverage and has agreed to provide a defense under a reservation of
rights. Premix intends to vigorously defend this claim and believes it
has meritorious defenses. Premix is unable to determine the exact
extent of it exposure or the outcome of this litigation.
Premix and Acrocrete are engaged in other legal actions and
claims arising in the ordinary course of its business, none of which
are believed to be material to the Company.
On April 27, 1999, certain Dissenting Shareholders owning shares of
the Company's preferred stock filed a petition for appraisal in the
Delaware Chancery Court to determine the fair value of the shares at
December 31, 1998, the Effective Date of the Company's Merger. (See Note 2
to Notes to Consolidated Financial Statements).
(b) Leases
------
The Company pays aggregate annual rent of approximately $248,000 for
its current operating facilities. The leases expire at various dates
ranging from March 31, 2000 to August 31, 2008. Comparable properties at
equivalent rentals are available for replacement of these facilities if
such leases are not extended.
(c) Howard L. Ehler, Jr. ("the Executive") is employed by the Company
pursuant to a one year renewable agreement (the "Employment Agreement").
Mr. Ehler serves as Executive Vice President and Chief Financial Officer
of the Company at a current annual base salary of $130,000. The Executive
receives a car allowance, as well as certain other benefits, such as
health and disability insurance. The Executive is also entitled to receive
incentive compensation based upon targets formulated by the Company's
Compensation Committee.
Prior to a change in control, the Company has the right to terminate
the Employment Agreement without cause at any time upon
16
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
-continued-
(12) Commitments and Contingencies (continued)
-----------------------------
thirty days written notice, provided the Company pays to the Executive a
severance payment equivalent to 50% of his then current annual base
salary. As part of the Employment Agreement, the Executive has agreed not
to disclose confidential information and not to compete with the Company
during his term of employment and, in certain cases for a two (2) year
period following his termination.
In the event of a "Change in Control" (as defined in the Employment
Agreement), the Employment Agreement is automatically extended to a three
year period. Thereafter, the Executive will be entitled to terminate his
employment with the Company for any reason at any time. In the event the
Executive terminates his employment after a Change of Control, the
Executive will be entitled to receive the lesser of (i) a lump sum amount
equal to the base salary payments and all other compensation and benefits
Executive would have received had the Employment Agreement continued for
the full term; or (ii) three times Executive's base salary then in effect
on the effective date of termination. The Executive would also be entitled
to such severance in the event the Company terminates the Executive
without cause after a Change of Control.
In addition, Mr. Ehler was issued 75,000 shares of Common Stock of
the Company on July 31, 1997 pursuant to the terms of the Company's
Restricted Stock Plan. On January 21, 1998 and December 31, 1998, 25,000
and 50,000 shares, respectively, were released and reissued to Mr. Ehler
free of restrictions.
(d) During the third quarter of 1996, the Company entered into an
employment arrangement with Fred H. Hansen to serve as President of the
Company's subsidiaries, Premix and Acrocrete. Mr. Hansen presently
receives an annual base salary of $150,000 and a bonus based upon earnings
performance of the Subsidiaries. Under this arrangement, Mr. Hansen
received 33,333 shares of common stock in February 1997. In addition. Mr.
Hansen was issued 166,667 shares of Common Stock on July 31, 1997 pursuant
to the terms of the Company's Restricted Stock Plan. On January 21, 1998
and December 31, 1998, 33,333 and 133,334 shares, respectively, were
released and reissued to Mr. Hansen free of restrictions. Also Mr Hansen
is entitled to the use of a Company auto, or car allowance of $650 per
month during his employment, as well as certain other benefits, such as
health and disability insurance.
(e) Management has undertaken a company wide program to prepare the
Company's computer systems and other applications for the year 2000.
Possible year 2000 problems create a risk for a company in that unforeseen
problems in its own computer systems or those of its third party suppliers
could have a material impact on a company's ability to conduct its
business operations. The purpose of the Company's program is to identify
significant year 2000 exposures and to update its computer systems and
business operations to deal with those exposures.
17
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
-continued-
(12) Commitments and Contingencies (continued)
-----------------------------
Any internal staff costs as well as consulting and other expenses to
prepare the systems for the year 2000 are not expected to be material to
the Company's operating results. The Company believes the software used in
its internal operations is year 2000 compliant.
(13) Stock Based Compensation
------------------------
In October 1995, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 123 Accounting for
Stock-Based Compensation (SFAS 123). SFAS 123, the disclosure provisions
of which must be implemented for fiscal years beginning subsequent to
December 15, 1995, established a fair value based method of accounting for
stock based compensation plans, the effect of which can either be
disclosed or recorded. The Company has adopted the disclosure requirement
provisions of SFAS 123 in 1996. However, the Company has retained the
intrinsic value method of accounting for stock based compensation, based
on APB Opinion No. 225. Had the fair value based accounting provisions of
SFAS 123 been adopted, the effect would not be significant.
(14) Fair Value of Financial Instruments
-----------------------------------
The carrying amount of the Company's debt instruments approximate
fair value as defined under SFAS 107. Fair value is estimated based on
discounted cash flows as well as other valuation techniques.
18
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Results of Operations
-------------------------------------------------------------
and Financial Condition
-----------------------
General
-------
The Company's volume of business is related to the level of
construction activity in Florida and Georgia. The majority of the
Company's products are sold to building materials dealers located
principally in Florida and Georgia who provide materials to
contractors and subcontractors engaged in the construction of
residential, commercial and industrial buildings and swimming pools.
One indicator of the level and trend of construction activity is the
amount of building construction permits issued. The level of
construction activity is subject among other things, to population
growth, inventory of available housing units, government growth
policies and construction funding, among other things.
Results of Operations
---------------------
Six Months and Three Months Ended June 30, 1999 Compared to 1998
----------------------------------------------------------------
Net sales for the six months ended June 30, 1999 increased
$3,033,000, or approximately 35% compared to the same period in 1998.
The increase in sales was derived primarily from increased sales of
Acrocrete products, together with certain complementary products
manufactured by other companies, sold through the Company's
distribution outlets. The sales of Acrocrete products derived from
the Company's new distribution outlets in Tampa, Florida, acquired
February 1, 1998, Dallas, Georgia, opened July 1, 1998, and Gadsden,
Alabama, opened April 1, 1999, accounted for approximately $1,658,000
and $816,000 of the increase in sales for the six months and three
months ended June 30, 1999, respectively.
Gross profit as a percentage of net sales for the six months
and three months of 1999 was approximately 32% and 33%, compared to
33% and 35% in the comparable periods in 1998. The decrease in gross
profit margins was principally due to a greater proportion of sales
of lower gross margin products, including certain complementary
products manufactured by other companies sold through the Company's
distribution facilities. The Company is attempting to increase gross
profit margins through the Company's recent relocation of certain of
its manufacturing facilities and modifications made to manufacturing
processes to gain greater production efficiency. In addition, The
Company is instituting a price increase for certain products in the
third quarter of 1999. It is not certain that the price increase will
be accepted in the market.
Selling, general and administrative expenses as a percentage of
net sales for the six months and three months of 1999 was
approximately 24% and 25%, respectively, compared to 25%
19
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations (continued)
-------------------------
Results of Operations (continued)
---------------------
Six Months and Three Months Ended June 30, 1999 Compared to 1998
----------------------------------------------------------------
(continued)
and 24%, for the comparable periods last year. Selling, general and
administrative expenses increased $705,000 and $380,000, or
approximately 32% and 33%, for the six months and three months ended
June 30, 1999, compared to the same periods in 1998. The increase in
expenses was primarily due to additional sales expenses associated
with servicing the increased volume of business, including a new
senior marketing and sales manager, and operating costs related to
the Company's new distribution facilities. The second quarter 1998
results included professional and consulting fees of $60,000 related
to preparation of the Company's plan of merger consummated in 1998.
The 1999 six months and three months results include interest
expense in the amounts of $91,000 and $56,000, respectively,
associated with the issuance of Subordinated Debentures and payment
of obligations in connection with the Company's merger at December
31, 1998. Miscellaneous income for the six months ended June 30,
1998 included $62,000 of reimbursements the Company received from
the State of Florida environmental authorities insurance program for
the costs the Company incurred in prior years related to the removal
of underground fuel tanks located at its facilities.
In the six months and three months ended June 30, 1999 and 1998
the Company recognized an income tax provision at the federal
statutory rate of 35%. Based on the Company's net operating loss
carry-forwards, the Company is not expected to pay federal income
taxes for the current year.
As a result of the above factors, the Company derived net
income applicable to common stockholders of $441,000 and $258,000
for the six months and three months ended June 30, 1999, compared to
net income of $288,000 and $188,000, for the comparable periods in
1998. Net income applicable to common stockholders includes charges
of $165,000 and $82,000 in the 1998 six month and three month
periods for unpaid cumulative dividends on preferred stock which was
eliminated effective December 31, 1998.
Liquidity and Capital Resources
-------------------------------
At June 30, 1999, the Company had working capital of
approximately $2,740,000 compared to working capital of $2,439,000
at December 31, 1998. As of June 30, 1999, the Company had cash and
cash equivalents of $883,000.
The Company's principal source of short-term liquidity is
existing cash on hand and the utilization of a $3,000,000 line of
20
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations (continued)
-------------------------
Liquidity and Capital Resources (continued)
-------------------------------
credit with a commercial lender scheduled to expire on June 19, 2000.
Premix and Acrocrete, the Company's subsidiaries, borrow on the line
of credit, based upon and collateralized by, its eligible accounts
receivable and inventory. Generally, accounts not collected within
120 days are not eligible accounts receivable under the Company's
borrowing agreement with its commercial lender. At June 30, 1999,
$1,981,000 had been borrowed against the line of credit.
Trade accounts receivable represent amounts due from building
materials dealers located principally in Florida and Georgia who have
purchased products on an unsecured open account basis and through
Company owned warehouse distribution outlets. The Company presently
owns and operates five warehouse distribution outlets. Accounts
receivable, net of allowance, at June 30, 1999 was $3,031,000
compared to $2,535,000 at December 31, 1998. The increase in
receivables of $496,000, or approximately 20%, was primarily related
to higher sales levels prevalent during the period preceding June 30,
1999, as compared to the same three month period preceding December
31, 1998, and to a lesser extent, slower payment practices from
certain of the Company's customers.
In 1998, the Company developed a plan in the form of a merger
with a wholly owned subsidiary to satisfy the Company's redeemable
preferred stock dividend arrearage and mandatory sinking fund
requirements which aggregated $7,293,000 at September 30, 1998. The
plan was approved at a special meeting of stockholders on December
17, 1998, with the merger becoming effective December 31, 1998.
As a result of the consummation of the merger, each share of
common stock outstanding prior to the merger was converted to one
share of common stock of the Company. The holders of each share of
preferred stock had the option to convert such shares into either
(a) $4.75 in cash and ten shares of the Company's common stock, or
(b) $2.25 in cash, an 8% subordinated debenture and five shares of
the Company's common stock.
In accordance with the merger agreement, the Company is
required to issue to the holders of 219,021 shares of preferred
stock an aggregate of $984,960 face amount, 8% subordinated
debentures, 1,574,610 shares of common stock and pay $732,550 in
cash to the former preferred shareholders. At June 30, 1999, the
Company had paid $684,375 of such cash amount from cash proceeds
derived from its line of credit. Holders representing 81,100
preferred shares have elected dissenters rights, which, under
Delaware law, would require cash payments equal to the fair value of
their stock, to be determined in accordance with Section 262 of the
Delaware General Corporation Law. The Company is unable to determine
the fair value of the preferred stock but reserved the equivalent of
the estimated value of option (b) above, since that is the
consideration the dissenting holders would receive if they
21
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations (continued)
-------------------------
Liquidity and Capital Resources (continued)
-------------------------------
did not perfect their dissenters' rights under the law. Dissenting
stockholders filed a petition for appraisal rights in the Delaware
Chancery Court on April 27, 1999. Expenses associated with the
merger aggregated approximately $456,000 and were charged to expense
in the 1998 Consolidated Statement of Operations. The cash payable
to the former preferred shareholders not yet paid is presented as
cash payable to stockholders on the Company's Balance Sheet as at
June 30, 1999.
The Company's stockholders' equity of $2,722,000 at June 30,
1999, compared to a common stockholders' deficit of $4,441,000 at
December 31, 1997, resulted from the financial effect of the
merger, principally the elimination of the preferred stock and the
accumulated unpaid accrued dividends thereon, and net income
derived in 1998 and 1999.
In February 1998, Acrocrete, Inc. acquired the property, plant,
equipment and inventory of a wholesale distribution facility engaged
in the sale of landscape stone and building materials. The total
purchase price was approximately $400,000. A portion of the purchase
price was financed through the issuance of a $215,000 mortgage note
payable monthly over four years, with interest at the rate of 7 1/2%
per annum.
The Company has no material capital expenditures planned for
the next twelve months, other than expenditures that the Company
intends to spend to upgrade the Company's facilities and maintain
its equipment to support its operations. Management estimates it
will require a cash investment of approximately $150,000 to fund
these improvements in 1999. Effective April 1, 1999, the Company
opened a new leased distribution facility in Gadsden, Alabama for a
nominal capital investment. The Company expects working capital
requirements of approximately $150,000 to $200,000 will be funded
under the Company's line of credit. The Company presently is
evaluating the feasibility of opening other warehouse distribution
facilities. Capital needs associated with opening any additional
facilities cannot be estimated at this time.
The Company believes its cash on hand, utilization of unused
borrowings under its line of credit, and the maintenance of its
borrowing arrangement with its commercial lender will provide
sufficient cash to supplement cash shortfalls, if any, from
operations and provide adequate liquidity for the next twelve months
to satisfy the obligations arising from the merger and support the
cash requirements of its capital expenditure programs.
22
<PAGE>
Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations (continued)
-------------------------
Liquidity and Capital Resources (continued)
-------------------------------
The ability of the Company to maintain and improve its long
term liquidity is dependent upon the Company's ability to
successfully (i) maintain profitable operations; (ii) pay or
otherwise satisfy obligations arising from the merger; and (iii)
resolve current litigation on terms favorable to the Company.
This Form 10-Q contains certain forward looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995 with respect to the financial condition, results of
operations and business of Imperial Industries, Inc., and its
subsidiaries, including statements made under Management's
Discussion and Analysis of Financial Condition and Results of
Operations. These forward looking statements involve certain risks
and uncertainties. No assurance can be given that any of such
matters will be realized. Factors that may cause actual results to
differ materially from those contemplated by such forward looking
statements include, among others, the following: the competitive
pressure in the industry; general economic and business conditions;
the ability to implement and the effectiveness of business strategy
and development plans; quality of management; business abilities and
judgement of personnel; and availability of qualified personnel;
labor and employee benefit costs.
Year 2000 Issues
----------------
Management has undertaken a company wide program to prepare the
Company's computer systems and other applications for the year 2000.
The year 2000 problem, which is common to most businesses, concerns
the inability of such systems to properly recognize dates and date-
sensitive information on and beyond January 1, 2000. In 1997, the
Company began to assess the vulnerability of its systems to the year
2000 problem. Based on such assessment, the Company has developed a
year 2000 compliance plan, under which all key information systems
are being tested, and non-compliant software replaced. The Company
expects to complete testing and verification of such systems for
year 2000 compliance during 1999. The Company is also surveying the
year 2000 compliance status and compatibility of customers' and
suppliers' systems which interface with the Company's systems or
could otherwise impact the Company's operations.
The Company currently believes that it will be able to modify
or replace its affected systems in time to minimize any detrimental
effects on its operations. The most reasonable likely worst case
scenario of failure by the Company, or its customers, or suppliers,
to resolve the year 2000 problem would be a temporary slowdown of
operations at one or more of the Company's facilities and temporary
inability on the part of the Company to timely process orders and
billing and deliver finished products to its customers. The Company
is currently considering and identifying various contingency
options, including manual alternatives to systems operations, which
would minimized the risk of any unresolved year 2000 problems of
their operations.
23
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations (continued)
-------------------------
Liquidity and Capital Resources (continued)
-------------------------------
The Company believes any internal staff costs, replacement of
systems and consulting expenses to prepare the systems for the year
2000 will not be material to the Company's operating results,
liquidity or financial position.
24
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
PART II. Other Information
Item 1. Legal Proceedings
-----------------
See notes to Consolidated Financial Statements, Note 10(a), set
forth in Part I Financial Information.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibit No. Description
---------- -----------
2.1 Agreement and Plan of Merger, by and between Imperial Industries,
Inc. and Imperial Merger Corp. dated October 12, 1998 (Form S-4
Registration Statement, Exhibit 2).
3.1 Certificate of Incorporation of the Company, (Form S-4
Registration Statement, Exhibit 3.1).
3.3 By-Laws of the Company, (Form S-4 Registration Statement, Exhibit
3.2).
4.1 Form of Common Stock Purchase Warrant issued to Auerbach, Pollak
& Richardson, Inc., (Form S-4 Registration Statement, Exhibit
4.1).
4.2 Form of 8% Subordinated Debenture, (Form S-4 Registration
Statement, Exhibit 4.2).
4.3 Warrant Agreements as of June 22, 1988 between the Company and two
of its directors, S. Daniel Ponce and Lisa M. Brock, formerly
Lisa M. Thompson. (Form 8-K dated June 29, 1988, File No. 1-7190,
Exhibit 10.3)
10.1 Financing Agreements, dated as of June 20, 1988 between Premix
and Congress. (Form 8-K dated June 29, 1988, File No. 1-7190,
Exhibit 10.2)
10.2 Amendment, dated January 12, 1998 to the Financing Agreement
filed September 4, 1998, (Form S-4 Registration Statement,
Exhibit 10.1 (ii).
10.3 1979 Non-Qualified Stock Option Plan (Registrant Statement No. 2-
69479, Exhibit 1.D).
10.4 1984 Stock Option Plan (Form 10-K, year ended December 31, 1984,
File No. 1-7190, Exhibit 10.5)
10.5 Agreement dated as of May 16, 1989, between the Company and four
insurance companies, relating to the defense and indemnity of
asbestos related personal injury claims against Premix. (Form 10-
Q, quarter ended September 30, 1989, File No. 1-7190, Exhibit 10)
25
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
PART II. Other Information
(continued)
Item 6. Exhibits and Reports on Form 8-K (continued)
--------------------------------
Exhibit No. Description
- ---------- -----------
10.6 Employment Agreement dated July 26, 1993 between Howard L. Ehler,
Jr. and the Company. (Form 8-K dated July 26, 1993)
10.7 Employment Agreement dated July 3, 1996 between Fred H. Hansen
and the Company, (Form S-4 Registration Statement, Exhibit 10.3).
10.8 Restricted Stock Plan, (Form S-4 Registration Statement, Exhibit
10.4).
10.9 License Agreement between Bermuda Roof Company and Premix
Marbletite Manufacturing Co., (Form S-4 Registration Statement,
Exhibit 10.5).
(b) Reports on Form 8-K
None
26
<PAGE>
IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMPERIAL INDUSTRIES, INC.
By: /S/ Howard L. Ehler, Jr.
----------------------------
Howard L. Ehler, Jr.
Executive Vice President/
Principal Executive Officer
By: /S/ Betty Jean Murchison
----------------------------
Betty Jean Murchison
Principal Accounting Officer/
Assistant Vice President
August 12, 1999
27
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 883
<SECURITIES> 0
<RECEIVABLES> 3,317
<ALLOWANCES> 286
<INVENTORY> 1,894
<CURRENT-ASSETS> 6,373
<PP&E> 2,742
<DEPRECIATION> 1,238
<TOTAL-ASSETS> 8,574
<CURRENT-LIABILITIES> 3,633
<BONDS> 0
0
0
<COMMON> 82
<OTHER-SE> 2,746
<TOTAL-LIABILITY-AND-EQUITY> 8,574
<SALES> 11,818
<TOTAL-REVENUES> 11,821
<CGS> 8,065
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<OTHER-EXPENSES> 2,891
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<INTEREST-EXPENSE> 187
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