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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
(AMENDMENT NO.2)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED,
EFFECTIVE OCTOBER 7, 1996]
For the fiscal year ended March 31, 1997
[ ] 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.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3179629
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(State or Other Jurisdiction) (I.R.S. Employer
of Incorporation or Organization Identification No.)
310 Commerce Drive, Amherst, New York 14228
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(Address of Principal Executive Offices) (Zip Code)
(716) 691-6333
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(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
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(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
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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. [X]
As of June 30, 1997, the aggregate market value of the registrant's Common Stock
held by non-affiliates was $119,378,561. the closing price of the Common Stock
on June 30, 1997 as reported on the Nasdaq National Market, was $16.25.
At June 30, 1997, 8,311,486 shares of common stock of the Registrant were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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The undersigned registrant hereby amends its Annual Report on Form 10-K for the
fiscal year ended March 31, 1997. To the extent this amended filing is
inconsistent with the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1997 (the "original filing"), the original filing is hereby
superseded and amended.
PART I
ITEM 1. BUSINESS
THE COMPANY
International Imaging Materials, Inc. (the "Company") is the largest
manufacturer in North America of thermal transfer ribbons 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
and variable data 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.
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.
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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, a decrease in the cost of installing bar
code systems, making them more affordable for end-users, 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 North American manufacturer of process color
thermal transfer ribbons comprised of separate panels of yellow, magenta, cyan
and black on the same ribbon. Although color thermal transfer desktop 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 desktop 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.
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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 desktop printers. Thus, the Company
manufactures one or more different ribbons for each color printer model
manufactured by each OEM customer. The Company typically sells color thermal
transfer ribbons only to the printer manufacturer thereby giving each OEM a
proprietary ribbon to sell in the aftermarket.
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. In addition, the Company has developed a new family
of Duracoat(TM) ribbons to address new market opportunities. Duracoat(TM) 100
general purpose color ribbons are ideal for use in printing novelty items, such
as T-shirt transfers. Duracoat(TM) 200 ribbons have higher durability and print
quality, and are used primarily for printing color tags and labels, and for
printing variable data on flexible packages, such as date or lot codes on snack
foods. Duracoat(TM) 300 ribbons combine ultra-violet resistance and durability
with the ability to print on a variety of vinyl substrates, making this ribbon
ideal for use in printing outdoor signage. The Company sells its Duracoat(TM)
color ribbons through both the aftermarket channel and directly to OEMs.
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.
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The Company employs a total of 49 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, 1997 was $4.3 million, up $114,000
from $4.2 million on March 31, 1996.
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.
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 30
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
<PAGE>
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 to supplement
its internal research and development efforts and to provide technical expertise
with respect to a variety of research and development efforts.
The Company's research and development expenses were $2.2 million, $3.1
million and $3.6 million during fiscal years 1995, 1996 and 1997, 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 1997) 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 essentially 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 desktop 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 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). Sony Chemical, Dai Nippon
Printing and Ricoh Electronics 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 and NCR Corporation.
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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, 1997, the Company had 690 employees, of whom 47 were
engaged in sales, 27 in research and development, 41 in finance and
administration, 156 in manufacturing support, 363 in manufacturing operations
and 56 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.
. 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.
Subsequent Event
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On July 15, 1997, the Company, PAXAR Corporation, a New York corporation
("PAXAR"), and Ribbon Manufacturing, Inc., a Delaware corporation and a wholly
owned subsidiary of PAXAR ("Merger Sub"), entered into an Agreement and Plan of
Merger (the "Merger Agreement"), upon and subject to the terms and conditions of
which Merger Sub will be merged (the "Merger") with and into the Company and the
Company will become a wholly owned subsidiary of PAXAR. In the Merger, each
issued and outstanding share of the common stock of the Company will be
converted into the right to receive between 1.2 and 1.412 shares of common stock
of PAXAR. A copy of the Merger Agreement was filed as Exhibit 2 to the Company's
Current Report on Form 8-K, dated July 29, 1997.
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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 one warehouse
totaling approximately 275,000 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 1997.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
YEAR ENDED MARCH 31, 1996:
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Price
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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
YEAR ENDED MARCH 31, 1997:
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Price
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Quarter Ended High Low
- ---------------------------- ------- -------
July 2, 1996 $24.000 $16.250
October 1, 1996 $24.500 $20.000
December 31, 1996 $26.000 $21.250
March 31, 1997 $24.000 $14.750
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data as of March 31, 1996 and 1997 and
for the years ended March 31, 1995, 1996 and 1997 have been derived from the
audited consolidated financial statements of the Company incorporated herein by
reference. The selected financial data as of March 31, 1993, 1994 and 1995 and
for the years ended March 31, 1993 and 1994 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:
<TABLE>
<CAPTION>
March 31,
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1993 1994 1995 1996 1997
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(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
For the year ended:
Revenues $48,438 $61,576 $85,477 $ 88,448 $106,894
Income from continuing operations 3,067 6,100 9,970 9,903 11,296
Net income from continuing
operations per share 0.51 0.76 1.10 1.07 1.26
Cash dividends --- --- --- --- ---
At year end:
Total assets 57,483 76,876 97,944 115,461 118,474
Notes payable to banks and
long-term debt $24,745 $ 7,349 $ 5,637 $ 20,225 $ 10,738
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
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The Company's financial emphasis in fiscal 1997 was increasing value for its
stockholders. The Company generated free cash of $11.8 million or $1.37 per
share, and in conjunction with borrowings on its lines of credit, repurchased
878,400 shares of its common stock between the fourth quarter of fiscal 1996 and
the first two months of fiscal 1998. In addition, 375,788 shares of common
stock were surrendered between the third quarter of fiscal 1996 and the fourth
quarter of fiscal 1997 by officers and a director in connection with the
exercise of stock options and warrants. This 1,254,188 share or 14.0% decrease
in the Company's outstanding common stock resulted in a $.07 contribution to
earnings per share in fiscal 1997.
Revenues in fiscal 1997 were $106.9 million, an increase of 20.9% from $88.4
million in fiscal 1996. Revenues in fiscal 1995 were $85.5 million and included
$6.0 million of revenue, primarily jumbo rolls to Armor, Fujicopian's thermal
transfer licensee for Europe, which did not recur in fiscal 1996. Therefore,
recurring revenues grew 11.3% from fiscal 1995 to fiscal 1996.
The Company sells its ribbons primarily to printer original equipment
manufacturers, which in turn sell the ribbons under their own brand names to
end-users, either directly or through distributors and value-added resellers.
Revenues from OEM customers in fiscal 1997 were $77.6 million, comprised 72.6%
of total revenues, and increased 15.7% from $67.1 million in fiscal 1996. This
increase primarily reflects the transfer of ribbon production for a significant
color ribbon program from Fujicopian during fiscal 1996, new products introduced
to existing tag and label and fax customers in North America, and increased
sales of existing and new products outside of North America.
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 1997 were $26.4 million, comprised 24.7% of total
revenues and increased 30.4% from $20.2 million in fiscal 1996. The addition of
several new significant tag and label customers, new product lines introduced to
existing tag and label customers, overall tag and label aftermarket growth, and
the continuing end-user migration towards this distributor channel from the OEM
channel as the market for tag and label ribbons matures were primarily
responsible for this growth.
The continued expansion of the market for tag and label printing in Central and
South America, and the Company's marketing programs targeting these
opportunities, were principally responsible for significant revenue growth for
existing customers and the addition of a significant new customer in the
international distributor channel. Revenues for this channel were $3.0 million
in fiscal 1997, comprised 2.8% of total revenues, and increased 149.3% from $1.2
million in fiscal 1996.
Recurring revenues for the OEM channel increased 10.1% from fiscal 1995 to
fiscal 1996, principally due to the transfer of ribbon production for the
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. Domestic distributor revenues increased 13.6% from fiscal 1995 to
fiscal 1996. 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, all contributed
to this growth.
The Company's ribbon unit selling prices in total declined slightly in fiscal
1997 after remaining comparable from fiscal 1995 to fiscal 1996. Selling price
decreases to tag and label ribbon OEM and distributor customers were partially
offset by slight increases in selling prices to color ribbon OEM customers and
significantly higher selling prices to dealers, distributors and end-users for
QMS thermal transfer supplies.
Gross margins were 29.1% of revenues in fiscal 1997 as compared to 29.6% in
fiscal 1995. This decline primarily resulted from the incremental operating
expenses from the new manufacturing facility opened during fiscal 1997, a change
in sales mix and lower overall selling prices, partially offset by the increased
leverage of fixed overhead costs and production efficiencies from higher sales
volumes, lower raw material purchase prices, and higher margins on the QMS
thermal transfer supplies business. The gross margin decline in fiscal 1996 from
29.8% of revenues in fiscal 1995 primarily reflects the fixed overhead costs not
absorbed by temporarily declining revenues from customers reducing their
inventory levels, partially offset by higher margins on the QMS thermal transfer
business and no management bonuses in fiscal 1996.
Total operating expenses were $13.2 million in fiscal 1997, an increase of 21.0%
from $10.9 million in fiscal 1996. Research and development expenses increased
$515,000 due to personnel additions to create new products for future revenue
growth, partially offset by lower costs of samples produced in the new pilot
manufacturing facility. Selling expenses increased $1.1 million due to the
hiring of additional personnel for the Company's telemarketing and direct sales
forces and to identify opportunities for future products and increased
advertising to maximize revenue from new products. General and administrative
expenses increased $638,000, primarily due to increased staffing in human
resources, finance and management information systems to support the Company's
growth.
Total operating expenses in fiscal 1996 increased by 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.
Net interest expense was $562,000 in fiscal 1997, an increase of $527,000 from
$35,000 in fiscal 1996. Total interest cost incurred in fiscal 1997 was
$900,000, of which $238,000 was capitalized as part of the cost of construction
of and equipment for the 100,000 square-foot manufacturing facility completed
during the first quarter, and $617,000 was charged to income. Total interest
cost incurred in fiscal 1996 was $748,000, including $612,000 capitalized in
conjunction with the new facility and $136,000 charged to income. Net interest
income in fiscal 1995 was $143,000 before the Company's cash and short-term
investments were used together with borrowings on lines of credit in fiscal 1996
to fund the new facility, purchase the QMS thermal transfer supplies business,
and repurchase 315,400 shares of the Company's common stock.
Income taxes in fiscal 1997 were $6.1 million or 35.0% of income before income
taxes. In fiscal 1996, income taxes were $5.3 million or 35.0% of income before
income taxes. Income taxes in fiscal 1995 were $6.1 million or 38.0% of income
before income taxes. Benefits from changes in the New York State alternative
minimum tax calculation and the Company's foreign sales subsidiary established
at the beginning of fiscal 1996 contributed to the rate reduction. 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 exercises 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.
Liquidity and Capital Resources
- -------------------------------
The Company's financial condition remains strong, with long-term debt comprising
only 1.2% of total capitalization at March 31, 1997. Cash provided by operating
activities in fiscal 1997 of $25.6 million funded $13.8 million of capital
expenditures, leaving free cash flow of $11.8 million or $1.37 per share, which
was used to repay $9.5 million on the Company's lines of credit and long-term
debt, and repurchase 142,200 shares of the Company's common stock for $2.5
million. The Company expects to spend approximately $7 million on capital
expenditures in fiscal 1998, primarily to purchase equipment to increase
manufacturing capacity and yield production efficiencies. The Company believes
that its internally generated cash, supplemented as needed by its lines of
credit, will be sufficient to fund its working capital, capital expenditure and
debt service requirements over the next two years.
Trade receivables increased $1.6 million in fiscal 1997, with the number of days
of sales in trade receivables increasing from 48 days at March 31, 1996 to 50
days at March 31, 1997, but still within the Company's typical range of 45 to 50
days. Inventories decreased $2.0 million during fiscal 1997, as the Company
worked with its key suppliers to reduce its raw material inventories. The $2.4
million decrease in other assets principally consists of the repayment of loans
which funded personal income tax withholdings due upon the exercise of stock
options by officers. The Company also repurchased 142,200 shares of its common
stock during the fourth quarter of fiscal 1997, at an average purchase price of
$17.47 per share. The Company repurchased an additional 420,800 shares of
its common stock during the first two months of fiscal 1998 at an average
purchase price of $17.33 per share. The Company terminated its common stock
repurchase plan in July 1997.
Cash provided by 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. Trade receivables increased $4.3 million in
fiscal 1996, primarily due to disproportionately higher sales volume in February
and March 1996. Inventories increased $2.3 million during fiscal 1996, as the
Company used available manufacturing capacity to increase its finished goods
inventories 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
during fiscal 1996 principally consists of the purchase price for the QMS
thermal transfer supplies business, of which $1.5 million was subsequently
amortized in fiscal 1997.
During fiscal 1996 and 1997, the Company loaned $3.4 million and $1.6 million to
certain officers in conjunction with the exercise of non-qualified stock
options. These exercises, in addition to the lapse of restrictions on
restricted stock, generated tax deductions of $6.3 million and $5.4 million for
the Company in fiscal 1996 and 1997, respectively. During fiscal 1996 and 1997,
$4.2 million and $3.9 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' personal income tax withholdings are included in other
assets since it is the intention of the Company to allow repayment beyond March
31, 1998. The portions of these loans that funded the exercise price of the
options are included as a reduction of stockholder's equity. These demand notes
are secured by the stock and personal assets of the officers.
Inflation
- ---------
Inflationary factors have not had a significant effect on the Company's overall
revenues or profitability during the past three years.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable until after June 15, 1998.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended March 31,
----------------------------
1995 1996 1997
------- -------- ---------
<S> <C> <C> <C>
(In thousands, except per share amounts)
Revenues $85,477 $88,448 $106,894
Cost of goods sold 59,968 62,253 75,737
------- ------- --------
Gross profit 25,509 26,195 31,157
------- ------- --------
Operating expenses:
Research and development 2,217 3,079 3,594
Selling 3,635 4,150 5,289
General and administrative 3,720 3,695 4,333
------- ------- --------
Total operating expenses 9,572 10,924 13,216
------- ------- --------
Operating income 15,937 15,271 17,941
Interest income (expense), net 143 (35) (562)
------- ------- --------
Income before income taxes 16,080 15,236 17,379
Income taxes 6,110 5,333 6,083
------- ------- --------
Net income $ 9,970 $ 9,903 $ 11,296
======= ======= ========
Net income per share of common stock $1.10 $1.07 $1.26
======= ======= ========
Weighted average common shares outstanding 9,093 9,224 8,967
======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
-----------------------------------
1996 1997
---------------- -----------------
(In thousands, except share and
ASSETS per share amounts)
- -----
<S> <C> <C>
Current assets:
Cash $ 570 $ 444
Trade receivables 16,157 17,726
Inventories:
Raw materials 9,397 5,789
Work in process 3,627 4,602
Finished goods 4,839 5,478
-------- --------
Total inventories 17,863 15,869
-------- --------
Prepaid expenses 635 1,107
Deferred income taxes 1,467 1,176
-------- --------
Total current assets 36,692 36,322
-------- --------
Property, plant and equipment, at cost:
Land 1,163 1,170
Building and improvements 10,924 21,265
Equipment 64,362 82,702
Construction in progress 17,194 814
-------- --------
93,643 105,951
Less accumulated depreciation 21,826 28,320
-------- --------
Net property, plant and equipment 71,817 77,631
-------- --------
Other assets 6,952 4,521
-------- --------
$115,461 $118,474
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------
Current liabilities:
Notes payable to banks 16,292 8,484
Current installments of long-term debt 1,674 1,143
Trade accounts payable 8,126 7,858
Other accrued liabilities 2,654 3,622
-------- --------
Total current liabilities 28,746 21,107
Long-term debt, excluding current installments 2,259 1,111
Deferred income taxes 6,336 8,388
-------- --------
Total liabilities 37,341 30,606
-------- --------
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; 8,855,301 and 8,570,310 shares issued
as of March 31, 1996 and 1997, respectively 89 86
Additional paid-in capital 53,037 44,514
Unearned compensation - restricted stock awards (692) (385)
Notes receivable from exercise of stock options and warrants (1,219) (37)
Retained earnings 32,394 43,690
Treasury stock, 310,400 shares, at cost (5,489) ---
-------- --------
Total stockholders' equity 78,120 87,868
-------- --------
$115,461 $118,474
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended March 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 9,970 $ 9,903 $ 11,296
-------- -------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,520 6,251 8,216
Deferred income taxes and other noncash expenses 2,482 2,804 2,972
Reduction in income taxes payable from the
exercise of options and warrants 1,969 1,464 1,477
Cash provided (used) by changes in:
Trade receivables (675) (4,418) (1,560)
Inventories (4,939) (2,256) 1,994
Prepaid expenses (236) 183 (472)
Other assets (7) 50 (310)
Trade accounts payable 2,956 (1,052) 1,018
Other accrued liabilities 2,845 (3,041) 968
-------- -------- --------
Total adjustments 8,915 (15) 14,303
-------- -------- --------
Net cash provided by operating activities 18,885 9,888 25,599
-------- -------- --------
Cash flows used in investing activities:
Capital expenditures (14,235) (17,477) (13,777)
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 (17,703) (19,584) (13,777)
-------- -------- --------
Cash flows from financing activities:
Proceeds from employee stock purchase plan 83 102 79
Purchase of common stock --- (5,576) (2,484)
Exercise of stock options and warrants:
Proceeds 1,013 409 1,576
Notes received for related tax liabilities (1,996) (2,816) (1,632)
Proceeds from (repayments of) notes payable to banks --- 16,292 (7,808)
Repayments of long-term debt (1,712) (1,704) (1,679)
-------- -------- --------
Net cash provided by (used in) financing activities (2,612) 6,707 (11,948)
-------- -------- --------
Net decrease in cash (1,430) (2,989) (126)
Cash at beginning of year 4,989 3,559 570
-------- -------- --------
Cash at end of year $ 3,559 $ 570 $ 444
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest, net of amount capitalized 218 151 663
Income taxes $ 311 $ 3,044 $ 2,269
======== ======== ========
Supplemental disclosure of noncash investing and
financing activities:
Increase (decrease) in liabilities for capital expenditures 528 1,172 (1,286)
Notes received for exercise price of stock options and warrants 1,880 548 ---
Common stock surrendered:
Payment of stock option exercise price --- 699 778
Repayments of notes by officers $ --- $ 4,210 $ 3,910
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C> <C>
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)
Net income 9,970 9,970
Restricted stock awards and other 271 (85) 104 290
---------- -------- -------- -------------
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)
Purchase of 315,400 treasury shares (5,576) (5,576)
Net income 9,903 9,903
Restricted stock awards and other 275 223 498
---------- -------- --------
Balance at March 31, 1996 89 53,037 (692) (1,219) 32,394 (5,489) 78,120
Exercise of options and warrants:
Shares issued, 373,045 (3,178) 5,489 2,311
Tax benefit 1,800 1,800
Shares surrendered, 208,807 (2) (4,686) 1,182 (3,506)
Purchase and retirement of 142,200 shares (1) (2,483) (2,484)
Net income 11,296 11,296
Restricted stock awards and other 24 307 331
---------- -------- --------
Balance at March 31, 1997 $86 $44,514 $ (385) $ (37) $43,690 $ --- $87,868
=== ======= ======= ========== ======== ======== =============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1995, 1996 AND 1997
(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) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
(c) 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 over the period of expected benefit.
(d) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
April 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of this Statement did not have any impact on the Company's
financial position or results of operations.
(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.
<PAGE>
INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(g) Stock-Based Compensation
Stock options and other stock-based compensation awards are accounted for
using the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations.
(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 lines of credit with two banks totaling $40,000,000
which are due on demand and bear 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. 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 one of the lines of credit. There was $16,292,000 and $8,484,000
outstanding under the facilities at 5.60% and 5.81% at March 31, 1996 and 1997,
respectively.
A summary of long-term debt follows:
Interest
Rate at
March 31, March 31,
--------------
1997 1996 1997
---------- ------ ------
(In thousands)
Term loans, due in:
1997 7.75% $ 631 $ 49
1998 7.75 2,562 1,630
2001 8.25 647 520
Other 2.50 93 55
------ ------
Total long-term debt 3,933 2,254
Less current installments 1,674 1,143
------ ------
Long-term debt, excluding
current installments $2,259 $1,111
====== ======
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.
The aggregate annual installments due on long-term debt for each of the next
five years are: $1,143,000 in fiscal 1998, $846,000 in fiscal 1999, $127,000 in
fiscal 2000, $127,000 in fiscal 2001 and $11,000 in fiscal 2002.
In connection with the construction of new manufacturing facilities, the
Company capitalized interest as a component of the cost of plant and equipment
as follows:
Years Ended March 31,
---------------------
1995 1996 1997
------ ------ -----
(In thousands)
Interest cost capitalized $ 235 $ 612 $ 283
Interest cost charged to income 284 136 617
----- ----- -----
Total interest cost incurred $ 519 $ 748 $ 900
===== ===== =====
<PAGE>
INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The 2001 term loan and one of the lines 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, 1997.
(3) STOCKHOLDERS' EQUITY
The Company has three stock plans under which non-qualified stock options and
restricted stock have been granted to employees and directors. The plans
authorize grants of up to 3,150,000 shares. All options were granted at the
fair market value of the Company's common stock on the grant date, vest over
five years, and expire ten years and one day after grant. The following table
summarizes option activity under these plans:
Weighted Average
Options Exercise Price
---------- ----------------
Outstanding at March 31, 1994 1,663,270 $ 8.09
Granted 290,946 $26.26
Exercised (388,942) $ 4.31
Forfeited (4,000) $18.57
--------- ------
Outstanding at March 31, 1995 1,561,274 $12.39
Granted 589,610 $21.55
Exercised (301,881) $ 5.39
Forfeited (241,000) $26.51
--------- ------
Outstanding at March 31, 1996 1,608,003 $14.95
Granted 315,294 $20.35
Exercised (320,605) $ 6.11
Forfeited (116,750) $23.37
--------- ------
Outstanding at March 31, 1997 1,485,942 $17.34
========= ======
Exercisable at March 31
1995 893,617 6.23
1996 708,501 8.42
1997 666,064 $13.70
Included in options granted and options forfeited in the table above are
236,000 options which were repriced from a weighted average exercise price of
$26.53 per share to $17.75 per share in fiscal 1996 and 52,000 options repriced
from an exercise price of $26.50 per share to $17.75 per share in fiscal 1997.
In exchange for the repricing of these options, the recipients agreed to forego
any payments at or below the target level under the Company's incentive bonus
compensation program for fiscal 1997.
The following table summarizes information about stock options
outstanding at March 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------- ------------------------
Range of Weighted Average Weighted Average Weighted Average
Exercise Prices Options Remaining Life Exercise Price Options Exercise Price
- ----------------- ------- ---------------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$ 5 - $14 348,784 4.4 years $ 6.23 290,429 $ 5.74
$16 - $22 825,823 8.2 years $19.44 308,334 $18.92
$22 - $27 311,335 8.3 years $24.17 67,301 $24.19
</TABLE>
<PAGE>
INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
In addition, the Company granted directors 2,400 shares of restricted stock
at a grant-date fair value of $24.00 per share in fiscal 1996 and 2,100 shares
at a grant-date fair value of $21.69 per share in fiscal 1997. Compensation
cost of restricted stock awards charged to earnings was $281,000 in fiscal 1996
and $274,000 in fiscal 1997.
The Company also has an employee stock purchase plan which allows employees
to purchase 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, 1996
and 1997, 9,055 and 13,626 shares, respectively, had been issued under this
plan.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock plans, and accordingly, no compensation cost has been
recognized for its stock options in the consolidated financial statements. Had
the Company determined compensation cost for its stock options under the
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation", the
Company's net income and net income per share of common stock would have been
reduced to the pro forma amounts indicated below:
Years Ended March 31,
----------------------------------------
1996 1997
---------- -----------
(In thousands, except per share amounts)
Net income As reported $9,903 $11,296
Pro forma 9,415 10,200
====== =======
Net income per share As reported 1.07 1.26
Pro forma $ 1.03 $ 1.17
====== =======
For purposes of this pro forma disclosure, the weighted average fair market
value of options granted in fiscal 1996 and fiscal 1997 of $9.42 and $9.06,
respectively, were calculated using the Black-Scholes option pricing model. The
weighted average assumptions used in the model were: volatility of 48.1%,
expected life of 6 years, no dividend yield, and risk-free interest rate of 6.0%
and 6.4% for fiscal 1996 and fiscal 1997, respectively.
Pro forma net income reflects only options granted in fiscal 1996 and 1997.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the option's vesting
period and compensation cost for options granted prior to April 1, 1995 is not
considered.
Additionally, the Company has warrants outstanding as follows:
Years Ended March 31,
-------------------------------------
1995 1996 1997
------------- ------------- -------
Warrants outstanding 119,640 102,440 50,000
============= ============= =======
Warrants exercisable 79,640 82,440 50,000
============= ============= =======
Exercise price range $5.00 - 10.00 $5.00 - 10.00 $ 10.00
============= ============= =======
During fiscal 1996, the Company loaned $548,000 to certain officers to fund
the exercise price of stock options and $2,816,000 to pay their personal income
tax liabilities related to the exercise. The Company also loaned $1,632,000 to
officers for their stock option related income tax liabilities in fiscal 1997.
In fiscal 1996 and 1997, $4,210,000 and $4,016,000, respectively, of such loans
were repaid through the surrender of shares of the Company's common stock and
cash. The Company intends to allow repayment of these demand notes, which are
collateralized by all of the personal assets of the respective officers, beyond
March 31, 1998.
<PAGE>
INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(4) INCOME TAXES
Income tax expense consists of the following:
Years Ended March 31,
----------------------
1995 1996 1997
------ ------ ------
(In thousands)
Current:
Federal $3,411 $2,662 $3,040
State 527 313 333
------ ------ ------
3,938 2,975 3,373
Deferred - Federal 2,172 2,358 2,710
------ ------ ------
Total income tax expense $6,110 $5,333 $6,083
====== ====== ======
Income tax expense differs from the expected amount (computed by applying the
34% statutory rate to income before income taxes) due principally to the effects
of the Company's foreign sales corporation, state income taxes and increase in
the valuation allowance for deferred tax assets.
The tax effects of temporary differences that give rise to the deferred tax
assets and liability were as follows:
March 31,
--------------------
1996 1997
--------- ---------
(In thousands)
Deferred tax assets:
Investment tax and other
credit carryforwards $ 3,384 $ 4,706
Alternative minimum tax credit
carryforwards 3,781 3,503
Capitalized inventory costs 581 493
Other 672 237
-------- --------
Total gross deferred tax asset 8,418 8,939
Valuation allowance (2,695) (3,648)
-------- --------
Net deferred tax asset 5,723 5,291
Deferred tax liability - depreciation of
plant and equipment (10,592) (12,503)
-------- --------
Net deferred tax liability $ (4,869) $ (7,212)
======== ========
The above net deferred tax liability is reflected in the balance sheets as
follows:
March 31,
------------------
1996 1997
-------- --------
(In thousands)
Current deferred tax asset $ 1,467 $ 1,176
Noncurrent deferred tax liability (6,336) (8,388)
------- -------
Net deferred tax liability $(4,869) $(7,212)
======= =======
<PAGE>
INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
In fiscal 1995, 1996 and 1997, 630,566, 319,081 and 373,045 shares of common
stock, respectively, were issued through the exercise of non-qualified stock
options and compensatory warrants. In addition, in fiscal 1996 and 1997,
restrictions lapsed on 41,900 and 10,000 shares of common stock, respectively.
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 $3,306,000, $2,313,000 and $1,844,000 in fiscal 1995, 1996 and
1997, respectively. Those benefits were recognized in the balance sheets as
follows:
Years Ended March 31,
----------------------
1995 1996 1997
------ ------ ------
(In thousands)
Reduction in:
Income taxes payable $1,969 $1,464 $1,477
Deferred income taxes 1,337 849 367
------ ------ ------
Credit to additional paid-in capital $3,306 $2,313 $1,844
====== ====== ======
At March 31, 1997, the Company's investment tax and other credits ($316,000
Federal and $6,651,000 State) expire from 2001 to 2013. The Company also has
$3,349,000 of Federal and $233,000 of State alternative minimum tax credit
carryforwards available with no expiration date.
(5) OTHER ASSETS
In fiscal 1996 $5,575,000 was paid to QMS, Inc. 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 and
$1,539,000 in fiscal 1996 and 1997, respectively.
(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 totaled $2,627,000, $2,681,000 and $2,680,000 in fiscal
1995, 1996 and 1997, respectively. The Company also purchased certain materials
from Fujicopian which totaled $4,579,000, $3,040,000 and $2,586,000 in fiscal
1995, 1996 and 1997, respectively. The Company believes that the costs of such
purchases are competitive with alternative sources of supply. Other accrued
expenses includes $1,184,000 and $1,020,000 payable to Fujicopian Co., Ltd. as
of March 31, 1996 and 1997, respectively.
At March 31, 1997, Fujicopian owned 260,000 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 $555,000, $639,000 and $852,000 in fiscal
1995, 1996 and 1997, respectively.
(8) COMMITMENTS
Rent expense under operating leases for certain buildings and equipment was
$253,000, $270,000 and $304,000 in fiscal 1995, 1996 and 1997, respectively.
Minimum annual payments due under these leases are $202,000 in fiscal 1998,
$189,000 in fiscal 1999, $191,000 in fiscal 2000 and 2001, $142,000 in fiscal
2002 and a total of $427,000 thereafter.
<PAGE>
INTERNATIONAL IMAGING MATERIALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(9) SIGNIFICANT CUSTOMERS
Sales to significant customers were: $10,282,000, $11,859,000 and
$15,660,000 to one customer in fiscal 1995, 1996 and 1997, respectively and
$9,599,000 and $14,842,000 to another customer in fiscal 1996 and 1997,
respectively. In addition, export sales in the aggregate were $9,576,000,
$9,753,000 and $19,452,000 in fiscal 1995, 1996 and 1997, respectively.
(10) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
Year Ended March 31, 1996
----------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
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
======= ======= ======= =======
<CAPTION>
Year Ended March 31, 1997
----------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- ------- ------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues $25,003 $26,851 $27,730 $27,310
Gross profit 7,524 7,838 8,231 7,564
Net income $ 2,831 $ 2,870 $ 3,040 $ 2,555
======= ======= ======= =======
Net income per share of common stock $ .32 $ .32 $ .34 $ .29
======= ======= ======= =======
</TABLE>
(11) ACCOUNTING PRONOUNCEMENTS
The Company is required to adopt Statement of Financial Accounting Standards
No. 128 (Earnings per Share) in fiscal 1998. The Company does not believe that
the adoption of this standard will have a material effect on the consolidated
financial statements.
<PAGE>
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, 1996 and 1997, 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, 1997. 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, 1996 and
1997, and the results of their operations and their cash flows for each of the
years in the three-year period ended March 31, 1997, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
- -----------------------------------------
KPMG PEAT MARWICK LLP
Buffalo, New York
April 23, 1997
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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information with respect to the
directors and executive officers of the Company.
Directors
- ---------
Robert S. Anderson, age 55, has been a Director of the Company since
1983. Since 1988, Mr. Anderson has been a Senior Vice President of Brean
Murray, Foster Securities Inc. Mr. Anderson also devotes a portion of his time
to money management at BMI Capital, a registered investment advisor and
affiliate of Brean Murray, Foster Securities Inc. Mr. Anderson is a member of
the board of directors of Trident International.
Richard A. Marshall, age 46, has been a Director of the Company since
March 1995. Mr. Marshall joined the Company in 1992 and is currently Executive
Vice President and Chief Operating Officer.
William P. Montague, age 50, has been a Director of the Company since
1994. Mr. Montague is currently the President and Chief Operating Officer of
Mark IV Industries, Inc. where he has been employed since 1972. Mr. Montague is
a certified public accountant and serves on the boards of directors of Gibraltar
Steel Corporation and Mark IV Industries, Inc.
Dr. Albert J. Simone, age 61, has been a Director of the Company since
1994. Dr. Simone has been President of the Rochester Institute of Technology
("RIT") since September 1992. From 1984 to 1992, Dr. Simone was President of
the University of Hawaii System and Chancellor of the University of Hawaii at
Manoa. Dr. Simone is a member of the Conference Board, Joint Institute for
Marine and Atmospheric Research, Pacific and Asian Affairs Counsel, Pacific
International Center for High Technology Research and the University's Research
Association. Dr. Simone is a member of the board of directors of Marine Midland
Bank, Rochester Division.
Alexander K. Daw, age 39, has been a Director of the Company since 1985.
Mr. Daw is the Managing Director of Research Laboratories of Australia Pty.
Ltd., an independent contract research organization founded in 1959 and devoted
to research in a number of areas, including imaging and image toning sciences.
John W. O'Leary, age 61, joined the Company in 1984 as President and
Chief Executive Officer and a Director. Mr. O'Leary is a member of the board of
directors of Marine Midland Bank, Rochester Division.
Michael J. Downey, age 53, has been a Director of the Company since 1993.
Mr. Downey, a private investor, was from 1989 to 1993 Chairman of the Board and
Chief Executive Officer of Prudential Mutual Fund Management. Mr. Downey also
served as an Executive Vice President and a member of the Operating Committee of
Prudential Securities Inc. Mr. Downey is a member of the Boards of Directors of
the Asia Pacific Fund, Inc., The Merger Fund, The Simba Fund, Ltd, and Value
Asset Management.
Donald D. Lennox, age 78, joined the Company in 1989 and is currently
Chairman of the Board of Directors. Mr. Lennox serves on the boards of
directors of Gleason Corporation, and various mutual funds affiliated with The
Prudential Insurance Company of America and its wholly-owned subsidiary,
Prudential Securities Inc.
Ronald J. Kubovcik, who was a Class I Director, resigned effective March
31, 1997.
The Company has a classified Board of Directors consisting of two Class I
Directors (Messrs. Downey and Lennox), four Class II Directors (Messrs.
Anderson, Marshall, Montague and Simone), and two Class III Directors (Messrs.
Daw and O'Leary). The current terms of the Class II, Class III and Class I
Directors continue until the Annual Meetings of Stockholders to be held in 1997,
1998 and 1999, respectively, and until their respective successors are elected
and qualified. At each Annual Meeting of Stockholders, a class of Directors is
elected for a full term of three years to succeed the class of Directors whose
terms expire at such Annual Meeting.
<PAGE>
Executive Officers
- ------------------
The Company's executive officers include John W. O'Leary, President and
Chief Executive Officer, Richard A. Marshall, Executive Vice President and Chief
Operating Officer, Vincent C. Dowell, Senior Vice President - Manufacturing,
Michael J. Drennan, Vice President - Finance, Treasurer, Secretary and Chief
Financial Officer, F. Lynn Hamb, Senior Vice President - Technical Operations
and Chief Technical Officer, David B. Lupp, Vice President - Controller,
Assistant Treasurer and Assistant Secretary, and Nick S. Mandrycky, Senior Vice
President - Sales. Each of these executive officers was appointed by, and
serves at the pleasure of, the Board of Directors. Information regarding John
W. O'Leary and Richard A. Marshall is included under "Directors".
Vincent C. Dowell, age 41, joined the Company in 1992 and is currently
Senior Vice President-Manufacturing. Prior to joining the Company, Mr. Dowell
was employed at Harris Corporation in its RF Communications Group, where his
last position was Director of Manufacturing.
Michael J. Drennan, age 42, joined the Company in 1984 and is currently
Vice President-Finance, Treasurer, Secretary and Chief Financial Officer. Mr.
Drennan is a certified public accountant.
F. Lynn Hamb, age 59, joined the Company in 1995 and is currently Senior
Vice President-Technical Operations and Chief Technical Officer. Prior to
joining the Company, Dr. Hamb was employed for 31 years by the Eastman Kodak
Company. During that time Dr. Hamb held various research, product development
and operational positions, most recently as Vice President and Regional Business
Manager for Eastman Kodak Asia-Pacific Limited.
David B. Lupp, age 40, joined the Company in 1989 and is currently Vice
President-Controller, Assistant Treasurer and Assistant Secretary. Mr. Lupp is
a certified public accountant.
Nick S. Mandrycky, age 39, joined the Company in 1988 and is currently
Senior Vice President - Sales.
The Merger Agreement, described in Item 1 of this Report, provides that
after the Merger the directors of Merger Sub immediately prior to the effective
time of the Merger (the "Effective Time") will be the initial directors of the
Company and the officers of the Company immediately prior to the Effective Time
will be the initial officers of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Under Section 16(a) of the Exchange Act, the Company's Directors,
executive officers and beneficial owners of more than 10% of the Common Stock
are required to report, among other things, their initial ownership of the
Company's equity securities and any subsequent changes in that ownership to the
Securities and Exchange Commission.
Section 16(a) also requires that copies be furnished to the Company.
Based upon a review of such forms received, the Company is not aware of any late
filings.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
- --------------------------
The following table sets forth certain information for the Company's past
three fiscal years ended
March 31, 1997 concerning the cash and non-cash compensation earned by or
awarded to the Chief Executive Officer of the Company and each of the other four
most highly compensated executive officers of the Company whose combined salary
and bonus exceeded $100,000.
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
---------
Annual Compensation Compensation Awards
------------------------------------------------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Securities
All Other Restricted Underlying All Other
Name and Fiscal Compensation Stock Options/ Compensation
Principal Position Year Salary ($) Bonus ($) $ (1) Awards ($)(3) SARs (#) ($)(2)
- ------------------------------ ---------- ------------ ---------- -------- ------------ ------- -------
John W. O'Leary 1997 302,900 --- 94,233 --- 61,829 95,257
President & 1996 285,755 --- 174,842 --- 116,611 95,565
Chief Executive Officer 1995 285,755 180,924 --- --- 45,000 175,087
Richard A. Marshall 1997 194,884 --- --- --- 25,000 8,092
Executive Vice President 1996 169,680 --- --- --- 42,500 6,909
& Chief Operating Officer 1995 144,000 95,064 --- --- 25,000 7,784
F. Lynn Hamb 1997 148,327 --- --- --- 17,000 9,059
Senior Vice President- 1996 127,688 --- --- --- 62,000 1,971
Technical Operations
& Chief Technical Officer
Vincent C. Dowell 1997 135,000 --- --- --- 15,000 6,827
Senior Vice President - 1996 123,003 --- --- --- 32,500 7,171
Manufacturing 1995 105,550 54,013 --- --- 20,000 5,645
Nick S. Mandrycky 1997 126,557 --- --- --- 13,000 6,626
Senior Vice President - 1996 117,918 --- --- --- 25,000 7,033
Sales 1995 113,383 53,864 --- --- 15,000 2,270
</TABLE>
(1) For the fiscal year ended March 31, 1997, amount for Mr. O'Leary consists of
(i) imputed interest, on non-interest bearing option exercise loans from the
Company, in the amount of $89,186, and (ii) amount for use of a Company car
of $5,047. Excludes certain perquisites for Messrs. Marshall, Hamb, Dowell,
and Mandrycky which do not exceed the lesser of $50,000 or 10% of the named
individual's aggregate salary and bonus.
(2) For the fiscal year ended March 31, 1997, amounts consist of (i) Company
contributions to the Company's 401(k) retirement savings plan on behalf of
Messrs. O'Leary, Marshall, Hamb, Dowell, and Mandrycky in the amounts of
$6,192, $6,188, $5,884, $6,125 and $6,002, respectively, (ii) life insurance
premiums paid by the Company on behalf of such persons in the amounts of
$47,650, $1,904, $3,175, $702 and $624, respectively and (iii) income tax
gross-up on the life insurance premium of $41,415 for Mr. O'Leary.
(3) At March 31, 1997, Mr. O'Leary held 60,937 shares of restricted Common Stock
with an aggregate market value of $1,127,335 (based on a market price of
$18.50 per share). At March 31, 1996 and 1995, Mr. O'Leary held shares of
restricted Common Stock of 68,837 and 108,337, respectively, with aggregate
market values of $1,273,485 and $2,004,235, respectively (based on a market
price of $18.50 per share). The 60,937 shares held by Mr. O'Leary at March
31, 1997 contain restrictions on disposition requiring continued employment
which will lapse from 1997 through 2001. Mr. O'Leary is entitled to receive
dividends with respect to such shares of restricted Common Stock.
<PAGE>
Options/SARs Grants in Last Fiscal Year
- ---------------------------------------
The following tables set forth certain information concerning the
grant of options during the fiscal year ended March 31, 1997 to each of the
executive officers named in the Summary Compensation Table and the number of
stock options held by such executive officers at the end of such fiscal year,
the value of such stock options and the potential value of such stock options at
assumed rates of stock appreciation.
OPTIONS/SARS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------
Number of Percent of Total Potential Realizable Value
Securities Options/SARs At Assumed Annual Rates
Underlying Granted Exercise or Of Stock Appreciation for
Options/SARs To Employees Base Price Expiration Option Term (1)
---------------
Name Granted (#)(2) In Fiscal Year ($/Share) Date 5% ()$10% ($)
- --------------------- ------------ --------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John W. O'Leary 30,000 (3) 9.7% 22.00 8/22/06 421,323 1,062,046
31,829 (4) 10.3% 16.125 3/27/07 394,186 931,869
Richard A. Marshall 25,000 (3) 8.1% 22.00 8/22/06 351,103 885,038
F. Lynn Hamb 17,000 (3) 5.5% 22.00 8/22/06 238,750 601,826
Vincent C. Dowell 15,000 (3) 4.9% 22.00 8/22/06 210,662 531,023
Nick S. Mandrycky 13,000 (3) 4.2% 22.00 8/22/06 182,573 460,220
</TABLE>
(1) These values have been determined based upon assumed rates of appreciation
and are not intended to forecast the possible future appreciation, if any,
of the price or value of the Company's Common Stock.
(2) The options entitle the holder to purchase shares of the Company's Common
Stock at an exercise price which is equal to the fair market value per share
on the date the stock option was granted. Payment of the exercise price may
be made in cash, shares of Common Stock or a combination of cash and shares.
Named executives who pay the exercise price by exchange of Common Stock
previously owned are issued a new stock option to purchase additional shares
of Common Stock equal to the number of shares of Common Stock so exchanged.
No stock option may be exercised after the expiration of ten years and one
day from the date of grant. In the event of a change in control of the
Company (as defined in the 1990 Incentive Plan), the stock options become
fully exercisable as of the date of the change in control.
(3) These options vest in five equal annual installments commencing October 1,
1997.
(4) These options were granted under the reload provision of the 1990 Incentive
Plan upon Mr. O'Leary's surrender of 31,829 shares of Common Stock
previously owned to pay the exercise price on his March 26, 1997 exercise of
102,640 stock options.
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
- --------------------------------------------------------------------------------
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options/
Shares Options /SARs At FY-End (#) SARs at FY-End ($) (1)
Acquired Value ----------------------------------------- ----------------------
Name On Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- --------------- ----------- ------------- ------------- ----------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
John W. O'Leary 102,640 1,141,870 237,994 178,546 2,175,317 123,743
Richard A. Marshall 12,500 217,188 45,900 75,600 173,100 121,650
F. Lynn Hamb --- --- 27,400 51,600 15,000 ---
Vincent C. Dowell 5,000 93,750 29,500 49,000 123,000 78,000
Nick S. Mandrycky 5,000 95,000 55,005 36,000 517,568 6,750
</TABLE>
(1) Based on a market price of $18.50 per share at March 31, 1997.
Compensation of Directors
- -------------------------
The Directors who are employees of the Company are not compensated for
serving as Directors. For the fiscal year ended March 31, 1997, Directors who
were not employees of the Company received an annual retainer fee of $8,000, a
committee retainer fee of $1,000 for each committee on which they served, plus a
fee of $1,000 for each meeting of the Board of Directors and its committees
which they attended.
Non-employee Directors also participate in the 1993 Outside Director
Stock Option Plan which provides for annual grants on April 1 of each year, to
each such Director, of stock options to purchase 1,000 shares of Common Stock at
the fair market value thereof. Additionally, each non-employee Director on
October 1, 1994 received an award of 1,500 shares of Restricted Stock. The Plan
provides for additional annual awards of 300 shares of Restricted Stock to each
non-employee Director on each October 1 thereafter. Directors of the Company
are also reimbursed for out-of-pocket expenses.
Employment Contracts and Termination of Employment and Change in Control
- ------------------------------------------------------------------------
Arrangements
- ------------
Effective in 1996, the Company entered into Continuity Agreements with the
executives named in the Summary Compensation Table. Such agreements for Messrs.
O'Leary, Marshall, Hamb, Dowell, and Mandrycky provide for minimum salaries of
$302,900, $189,861, $147,000, $135,000, and $128,224 respectively, bonuses as
determined by the Compensation Committee and employee benefits pursuant to any
plans and arrangements from time to time in effect.
Each of such Continuity Agreements provides that, in the event of
termination of employment for a reason other than cause or disability occurring
within 36 months after a change in control of the Company, as defined in the
agreement, the executive is entitled to the payment of: (i) an amount equal to
three times his highest annualized base salary plus three times the highest
bonus paid to such executive at any time during the five years preceding
termination and (ii) employee benefits for 36 months following termination. The
executive is also entitled to (i) and (ii) in the event he leaves within 36
months after a change in control for "good reason" including, among other
things, changes in his duties or responsibilities, relocation of the Company's
offices, or failure to continue a material compensation or benefit plan.
Payments to Messrs. O'Leary and Marshall are to be made in a lump sum upon
termination. Payments to the other executives are to be made in equal
installments over the 36 months following termination, subject to offset for
salary, bonus or benefit payments made by a subsequent employer within such 36
month period.
<PAGE>
In the event of termination without cause or in the event of termination
subsequent to the 36-month period after change in control, the executive is
entitled to receive, for a period of nine months, his base salary, benefits, any
deferred salary, bonuses or other compensation subject to the terms of the
applicable plan, and a pro rata portion of the bonus that would have been
payable for that fiscal year if maximum discretionary bonuses had been paid.
Amounts payable upon a change in control under any of the above Continuity
Agreements, are subject to reduction by an amount necessary to avoid any "excise
tax" under Section 4999 of the Internal Revenue Code of 1986, as amended.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
All of the members of the Compensation Committee are independent, non-
employee Directors of the Company and are not former officers of the Company.
Mr. Downey is Chairman and Messrs. Daw, Lennox and Montague are the other
current members of the Compensation Committee. No executive officer of the
Company serves as a member of the board of directors or on the compensation
committee of a corporation of which any of the Company's Directors serving on
the Compensation Committee or on the Board of Directors is an executive officer.
Mr. Lennox, the Company's Chairman of the Board and a member of the
Compensation Committee, was paid consulting fees of $80,000 by the Company
during the Company's fiscal year ended March 31, 1997. The Company anticipates
paying consulting fees to Mr. Lennox in the future.
Mr. Kubovcik, a former Director and member of the Compensation Committee, is
a partner in the law firm of Kubovcik & Kubovcik and a former partner in the law
firm of Adduci, Mastriani & Schaumberg, LLP, resident in their Washington DC
office, of both of which provide legal services to the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to the number of
shares of Common Stock beneficially owned, as of June 30, 1997, except as noted
in notes (1) and (3) below, by (i) each person who is known by the Company to
beneficially own more than 5% of the Common Stock, (ii) each Director and
nominee for Director of the Company, (iii) each executive officer identified in
the Summary Compensation Table and (iv) all executive officers and Directors of
the Company as a group. A person is a beneficial owner if he or she has or
shares voting power or investment power. At June 30, 1997, there were 8,311,486
shares of Common Stock outstanding. Except as noted below, the address of all
stockholders identified in the table and accompanying footnotes below is in care
of the Company at its principal executive offices.
<PAGE>
Percentage of
Number Outstanding
Of Shares Common Stock
--------- --------------
FMR Corporation (1) 689,900 8.3%
82 Devonshire Street
Boston, MA 02109
Frontier Capital Management (2) 507,090 6.1%
9a Summer Street
Boston, MA 02110
John W. O'Leary (3) 486,513 5.8%
Thomas W. Smith & Thomas N. Tryforos (4) 444,300 5.3%
323 Railroad Avenue
Greenwich, CT 06830
Alexander K. Daw (5) 403,300 4.9%
Nick S. Mandrycky (6) 60,005 *
Richard A. Marshall (7) 50,829 *
Robert S. Anderson (8) 48,143 *
Donald D. Lennox (9) 36,646 *
Vincent C. Dowell (10) 29,500 *
F. Lynn Hamb (11) 28,400 *
William P. Montague (12) 12,300 *
Michael J. Downey (13) 4,700 *
Albert J. Simone (12) 2,300 *
All Directors and executive
officers as a group (13 persons) 1,294,491 15.0%
* Represents less than 1% of the issued and outstanding Common Stock.
(1) Represents March 31, 1997 ownership as reported in FMR Corporation's
13(f) filing. FMR Corporation had sole investment power over the 664,100
shares and sole voting power over 96,800 of the shares of common stock of
the Company reported in their Schedule 13G dated February 14, 1997.
(2) Represents March 31, 1997 ownership as reported in Frontier Capital
Managements 13(f) filing.
(3) Includes 77,320 shares issuable pursuant to options exercisable within
60 days and 31,600 shares with restrictions on disposition requiring
continued employment which will lapse from 1997 through 2001.
(4) Represents March 31, 1997 ownership as reported in Thomas W. Smith's
13(f) filing. Thomas W. Smith and Thomas N. Tryforos have shared
investment and voting power over 434,000 shares, based on information
reported in Thomas W. Smith's and Thomas N. Tryforos' Schedule 13D dated
November 6, 1996.
(5) Includes 400,000 shares held by D.G. Daw Investments Pty. Ltd., with
which Mr. Daw has shared voting and investment power, 1,500 shares held
by Mr. Daw with restrictions on disposition which will lapse from 1997 to
2001, and 1,200 shares issuable pursuant to options exercisable within 60
days.
(6) Includes 55,005 shares issuable pursuant to options exercisable within 60
days.
(7) Includes 45,900 shares issuable pursuant to options exercisable within 60
days.
(8) Includes 1,500 shares with restrictions on disposition which will lapse
from 1997 to 2001, 1,200 shares issuable pursuant to options exercisable
within 60 days, and excludes 22,500 shares held by Mr. Anderson's spouse
as custodian for Mr. Anderson's minor children, as to which Mr. Anderson
disclaims beneficial ownership.
(9) Includes 1,500 shares with restrictions on disposition which will lapse
from 1997 to 2001 and 1,200 shares issuable pursuant to options
exercisable within 60 days.
(10) Consists entirely of 29,500 shares issuable pursuant to options
exercisable within 60 days.
(11) Includes 27,400 shares issuable pursuant to options exercisable within 60
days.
(12) Includes 1,500 shares with restrictions on disposition which will lapse
from 1997 to 2001, and 200 shares issuable pursuant to options
exercisable within 60 days.
(13) Includes 1,500 shares with restrictions on disposition which will lapse
from 1997 to 2001, and 600 shares issuable pursuant to options
exercisable within 60 days.
On July 15, 1997, the Company, PAXAR Corporation, a New York corporation
("PAXAR"), and Ribbon Manufacturing, Inc., a Delaware corporation and a wholly
owned subsidiary of PAXAR ("Merger Sub"), entered into an Agreement and Plan of
Merger (the "Merger Agreement"), upon and subject to the terms and conditions of
which Merger Sub will be merged (the "Merger") with and into the Company and the
Company will become a wholly owned subsidiary of PAXAR. In the Merger, each
issued and outstanding share of the common stock of the Company will be
converted into the right to receive between 1.2 and 1.412 shares of common stock
of PAXAR. A copy of the Merger Agreement was filed as Exhibit 2 to the Company's
current Report on Form 8-K, dated July 29, 1997.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain executive officers of the Company are indebted to the Company
under non-interest bearing demand notes and term-loans, secured by personal
assets, which were incurred to exercise stock options and in lieu of fiscal 1996
bonus, respectively. The amount of indebtedness as of June 30, 1997 of each
Officer and Director, whose indebtedness exceeded $60,000 during the fiscal year
follows. The maximum amount of indebtedness of each such person during the
fiscal year ended March 31, 1997 is the amount indicated in notes (1) - (6)
below.
<TABLE>
<CAPTION>
Amount of
Indebtedness ($)
Name Title at June 30, 1997
---- ----- ---------------
<S> <C> <C>
John W. O'Leary (1) President and Chief 2,148,846
Executive Officer
Richard A. Marshall (2) Executive Vice 25,452
President and Chief
Operating Officer
Michael J. Drennan (3) Vice President - Finance, 30,706
Secretary, Treasurer and
Chief Financial Officer
Vince C. Dowell (4) Senior Vice President - 14,351
Manufacturing
Nick S. Mandrycky (5) Senior Vice President - 81,570
Sales
David B. Lupp (6) Vice President - Controller, 98,550
Assistant Secretary and Assistant Treasurer
</TABLE>
(1) Maximum amount of in debtedness during the fiscal year was $2,930,334.
(2) Maximum amount of in debtedness during the fiscal year was $173,803.
(3) Maximum amount of in debtedness during the fiscal year was $1,318,356.
(4) Maximum amount of in debtedness during the fiscal year was $89,339.
(5) Maximum amount of in debtedness during the fiscal year was $88,449.
(6) Maximum amount of in debtedness during the fiscal year was $103,935.
Mr. Lennox, the Company's Chairman of the Board and a member of the
Compensation Committee, was paid consulting fees of $80,000 by the Company
during the Company's fiscal year ended March 31, 1997. The Company anticipates
paying consulting fees to Mr. Lennox in the future.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS - THE FOLLOWING FINANCIAL STATEMENTS, ARE
INCLUDED IN PART II, ITEM 8 OF THIS REPORT:
Consolidated Statements of Income for the years ended
March 31, 1995, 1996 and 1997
Consolidated Balance Sheets at March 31, 1996 and 1997
Consolidated Statements of Cash Flows for the years ended
March 31, 1995, 1996 and 1997
Consolidated Statements of Stockholders' Equity
for the years ended March 31, 1995, 1996 and 1997
Notes to Consolidated Financial Statements
Independent Auditors' Report
(2) FINANCIAL STATEMENT SCHEDULES:
Independent Auditors' Report on Financial Statement Schedule
Schedule II 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 September 18, 1996, between Fujicopian
Co., Ltd. and the Registrant. (Incorporated by reference to
Exhibit 10.1 of Form 10-Q dated October 1, 1996.)
<PAGE>
Exhibit
Number Description
- ------- -----------
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.)
10.4.1 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.)
<PAGE>
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.)
10.15.9 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.)
<PAGE>
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 January 2, 1997, between Marine
Midland Bank and the Registrant. (Incorporated by reference to
Exhibit 10.1 of Form 10-Q dated December 31, 1996.)
*10.19.1 1984 Stock Plan of the Registrant. (Incorporated by reference to
Exhibit 10.19.1 to the Registration Statement on Fo rm 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 Executive Continuity Agreement, dated December 31, 1996, between
John W. O'Leary and the Registrant. (Incorporated by reference to
Exhibit 10.24.1 of Form 10-Q dated December 31, 1996.)
*10.24.3 Executive Continuity Agreement, dated December 31, 1996, between
Richard A. Marshall and the Registrant. (Incorporated by
reference to Exhibit 10.24.2 of Form 10-Q dated December 31,
1996.)
*10.24.4 Executive Continuity Agreement, dated December 31, 1996, between
Michael J. Drennan and the Registrant. (Incorporated by reference
to Exhibit 10.24.3 of Form 10-Q dated December 31, 1996.)
*10.24.5 Executive Continuity Agreement, dated December 31, 1996, between
Vincent C. Dowell and the Registrant. (Incorporated by reference
to Exhibit 10.24.4 of Form 10-Q dated December 31, 1996.)
*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 December 31, 1996, between
Nick S. Mandrycky and the Registrant. (Incorporated by reference
to Exhibit 10.24.5 of Form 10-Q dated December 31, 1996.)
*10.24.8 Executive Continuity Agreement, dated December 31, 1996, between
Rickey W. Wallace and the Registrant. (Incorporated by reference
to Exhibit 10.24.6 of Form 10-Q dated December 31, 1996.)
*10.24.9 Executive Continuity Agreement, dated December 31, 1996, between
F. Lynn Hamb and the Registrant. (Incorporated by reference to
Exhibit 10.24.7 of Form 10-Q dated December 31, 1996.)
<PAGE>
Exhibit
Number Description
- ------- -----------
*10.24.10 Executive Continuity Agreement, dated December 31, 1996, between
David B. Lupp and the Registrant. (Incorporated by reference to
Exhibit 10.24.8 of Form 10-Q dated December 31, 1996.)
*10.24.11 Executive Continuity Agreement dated December 31, 1996, between
Susan R. Stamp and the Registrant. (Incorporated by reference to
Exhibit 10.24.9 of Form 10-Q dated December 31, 1996.)
*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.)
11 Statement re Computation of Per Share Earnings.
21 Subsidiaries of the Registrant
23 Consent of KPMG Peat Marwick
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K:
None
<PAGE>
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
July 29, 1997
----------------------------------
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John W. O'Leary President and Chief Executive July 29, 1997
- ------------------------------- Officer, Director
John W. O'Leary (Chief Operating Officer)
/s/ Michael J. Drennan Vice President - Finance, July 29, 1997
- ------------------------------- Treasurer, Secretary and
Michael J. Drennan Chief Financial Officer
/s/ Donald D. Lennox Chairman of the Board of Directors July 29, 1997
- -------------------------------
Donald D. Lennox
/s/ Robert S. Anderson Director July 29, 1997
- -------------------------------
Robert S. Anderson
Director
- ------------------------------
Alexander K. Daw
Director
- -----------------------------
Michael J. Downey
/s/ Richard A. Marshall Executive Vice President & July 29, 1997
- ---------------------------- Chief Operating Officer,
Richard A. Marshall Director
/s/ William P. Montague Director July 29, 1997
- ----------------------------
William P. Montague
/s/ Albert J. Simone Director July 29, 1997
- ----------------------------
Albert J. Simone
</TABLE>
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
International Imaging Materials, Inc.:
Under date of April 23, 1997, we reported on the consolidated balance sheets of
International Imaging Materials, Inc. and subsidiaries as of March 31, 1997 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,
1997, as contained in the 1997 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, 1997.
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 23, 1997
S-1
<PAGE>
SCHEDULE II
INTERNATIONAL IMAGING MATERIALS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
BALANCE AT AMOUNT CHARGE-OFFS BALANCE
BEGINNING CHARGED TO AND AT END OF
YEAR ENDED DESCRIPTION OF YEAR EXPENSES DISPOSALS YEAR
- ------------------------ ------------- -------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
March 31, 1995 Allowance for
doubtful trade
receivables 18 122 19 121
Inventories valuation 226 550 199 577
---- ---- ------ -----
$244 $672 $218 $ 698
==== ==== ==== ======
March 31, 1996 Allowance for
doubtful trade
receivables 121 169 6 284
Inventories valuation 577 226 403 400
---- ---- ------ ---
$698 $395 $409 $ 684
==== ==== ==== ======
March 31, 1997 Allowance for
doubtful trade
receivables 284 41 50 275
Inventories valuation 400 680 255 825
---- ---- ------ ---
$684 $721 $305 $1,100
==== ==== ==== ======
</TABLE>
S-2
<PAGE>
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------- ---------------------------------------- --------
<C> <S> <C>
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 September 18,
1996, between Fujicopian Co., Ltd. and
the Registrant. (Incorporated by
reference to Exhibit 10.1 of Form 10-Q
dated October 1, 1996.)
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.)
10.4.1 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.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- -------- ---------------------------------------- --------
<C> <S> <C>
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.)
10.15.9 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.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- -------- ---------------------------------------- --------
<C> <S> <C>
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 January 2,
1997, between Marine Midland Bank and
the Registrant. (Incorporated by
reference to Exhibit 10.1 of Form 10-Q
dated December 31, 1996.)
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- -------- --------------------------------------------------------------------- --------
<C> <S> <C>
10.24.1 Executive Continuity Agreement, dated December 31, 1996, between John
W. O'Leary and the Registrant. (Incorporated by reference to Exhibit
10.24.1 of Form 10-Q dated December 31, 1996.)
10.24.3 Executive Continuity Agreement, dated December 31, 1996, between
Richard A. Marshall and the Registrant. (Incorporated by reference
to Exhibit 10.24.2 of Form 10-Q dated December 31, 1996.)
10.24.4 Executive Continuity Agreement, dated December 31, 1996, between
Michael J. Drennan and the Registrant. (Incorporated by reference to
Exhibit 10.24.3 of Form 10-Q dated December 31, 1996.)
10.24.5 Executive Continuity Agreement, dated December 31, 1996, between
Vincent C. Dowell and the Registrant. (Incorporated by reference to
Exhibit 10.24.4 of Form 10-Q dated December 31, 1996.)
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 December 31, 1996, between Nick
S. Mandrycky and the Registrant. (Incorporated by reference to
Exhibit 10.24.5 of Form 10-Q dated December 31, 1996.)
10.24.8 Executive Continuity Agreement, dated December 31, 1996, between
Rickey W. Wallace and the Registrant. (Incorporated by reference to
Exhibit 10.24.6 of Form 10-Q dated December 31, 1996.)
10.24.9 Executive Continuity Agreement, dated December 31, 1996, between F.
Lynn Hamb and the Registrant. (Incorporated by reference to Exhibit
10.24.7 of Form 10-Q dated December 31, 1996.)
10.24.10 Executive Continuity Agreement dated December 31, 1996, between David
B. Lupp and the Registrant. (Incorporated by reference to Exhibit
10.24.8 of Form 10-Q dated December 31, 1996.)
10.24.11 Executive Continuity Agreement dated December 31, 1996, between Susan
R. Stamp and the Registrant. (Incorporated by reference to Exhibit
10.24.9 of Form 10-Q dated December 31, 1996.)
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.)
11 Statement re Computation of Per Share Earnings.
21 Subsidiaries of the Registrant
23 Consent of KPMG Peat Marwick
27 Financial Data Schedule
</TABLE>
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
SCHEDULE OF DEMAND AND TERM NOTES OF PERSONS
INDEBTED TO INTERNATIONAL IMAGING MATERIALS, INC.
IN AN AGGREGATE AMOUNT IN EXCESS OF $60,000
<TABLE>
<CAPTION>
Date of Payor of Type of Amount of
Note Note Note Note
- -------------------- ----------------- ------- -----------
<S> <C> <C> <C>
April 10, 1996 John W. O'Leary Term $ 47,626.00
February 24, 1997 John W. O'Leary Demand 63,725.33
March 26, 1997 John W. O'Leary Demand 421,878.34
June 16, 1997 John W. O'Leary Demand 184,280.37
June 30, 1997 John W. O'Leary Demand 1,431,336
-------------
$2,148,846.04
=============
April 10, 1996 Nick S. Mandrycky Term $ 13,757.33
May 8, 1995 Nick S. Mandrycky Demand 56,959.53
November 26, 1996 Nick S. Mandrycky Demand 10,852.97
-----------
$ 81,569.83
===========
April 10, 1996 David B. Lupp Term $ 10,769.33
September 19, 1995 David B. Lupp Demand 29,627.62
March 25, 1996 David B. Lupp Demand 3,860.00
March 29, 1996 David B. Lupp Demand 24,495.12
December 4, 1996 David B. Lupp Demand 7,330.00
March 26, 1997 David B. Lupp Demand 22,467.94
-----------
$ 98,550.01
===========
</TABLE>
<PAGE>
EXHIBIT 11
INTERNATIONAL IMAGING MATERIALS, INC.
CALCULATION OF NET INCOME PER SHARE OF COMMON STOCK
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Fiscal Year Ended March 31
--------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Net income $9,970 $9,903 $11,296
Weighted average shares outstanding 8,326 8,750 8,571
Common stock equivalents for restricted stock, stock options
and warrants 767 474 396
------ ------ -------
Weighted average common shares outstanding as adjusted 9,093 9,224 8,967
====== ====== =======
Net income per share of common stock $ 1.10 $ 1.07 $ 1.26
====== ====== =======
</TABLE>
<PAGE>
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
<PAGE>
Exhibit 23
Independent Auditors' 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 23, 1997, relating to the consolidated balance sheets of International
Imaging Materials, Inc. and subsidiaries as of March 31, 1997 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, 1997, and related
schedule, which reports appear in or are incorporated by reference in the March
31, 1997 annual report on Form 10-K of International Imaging Materials, Inc.
/s/ KPMG Peat Marwick LLP
-----------------------------------------
KPMG Peat Marwick LLP
Buffalo, New York
July 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 444
<SECURITIES> 0
<RECEIVABLES> 17,726
<ALLOWANCES> (275)
<INVENTORY> 15,869
<CURRENT-ASSETS> 36,322
<PP&E> 105,951
<DEPRECIATION> 28,320
<TOTAL-ASSETS> 118,474
<CURRENT-LIABILITIES> 21,107
<BONDS> 1,111
0
0
<COMMON> 86
<OTHER-SE> 87,782
<TOTAL-LIABILITY-AND-EQUITY> 118,474
<SALES> 106,894
<TOTAL-REVENUES> 106,894
<CGS> 75,737
<TOTAL-COSTS> 75,737
<OTHER-EXPENSES> 13,216
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 562
<INCOME-PRETAX> 17,379
<INCOME-TAX> 6,083
<INCOME-CONTINUING> 11,296
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,296
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.26
</TABLE>
