<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the period ended September 30, 2000
Xeikon N.V.
--------------------------------------------------------
[Translation of registrant's name into English]
72 Vredebaan, 2640 Mortsel, Belgium
--------------------------------------------------------
[Address of principal executive offices]
[Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.]
Form 20-F [x] Form 40-F [ ]
[Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.]
Yes [x] No [ ]
<PAGE> 2
XEIKON N.V.
INDEX
FORM 6-K
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at December 31, 1999
(Audited) and September 30, 2000 (Unaudited)................................... 3
Condensed Consolidated Statements of Operations for the three
months ended September 30, 1999 and 2000 (Unaudited)........................... 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1999 and 2000 (Unaudited)........................... 5
Consolidated Statements of Comprehensive Income/(Loss) and
Shareholders' Equity for the years ended December 31, 1997, 1998
and 1999 (audited) and for the three months ended
September 30, 2000 (unaudited)................................................. 6
Notes to Condensed Consolidated Financial Statements........................... 7-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................. 13-17
Item 3. Qualitative and Quantitative Disclosures About Market Risk..................... 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.............................................................. 18
Item 2. Changes in Securities and Use of Proceeds...................................... 18
Item 3. Defaults Upon Senior Securities................................................ 18
Item 4. Submission of Matters to a Vote of Security Holders............................ 18
Item 5. Other Information.............................................................. 18
Item 6. Exhibits and Reports on Form 6-K............................................... 18
SIGNATURES ............................................................................... 19
</TABLE>
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<PAGE> 3
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
XEIKON N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands of US dollars)
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
--------------------------------
(audited) (unaudited)
<S> <C> <C>
ASSETS
Current Assets :
-Cash and cash equivalents 9,237 9,133
-Accounts receivable 58,648 51,198
-Accounts receivable from related parties 4,427 1,627
-Inventory 56,044 61,210
-Other current assets 6,128 11,251
--------------------------------
Total current assets 134,484 134,419
--------------------------------
Property and equipment, at cost 30,180 45,072
Less -- accumulated depreciation (9,716) (12,808)
--------------------------------
20,464 32,264
--------------------------------
Other fixed assets, net 2,279 -
Other non-current assets 3,017 774
Goodwill, net 7,569 7,075
Acquired technology, net 1,503 4,091
--------------------------------
169,316 178,623
================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities :
-Notes payable to Banks 8,731 16,511
-Accounts payable 30,667 32,063
-Due to related parties 2,733 3,798
-Accrued expenses 17,363 21,129
-Deferred tax liabilities 160 591
--------------------------------
Total current liabilities 59,654 74,092
--------------------------------
Pension obligations 2,373 2,143
Notes payable to related parties 12,419 11,239
Refundable research grants payable, net of current portion 308 278
Minority interest 1,409 -
Shareholders' equity :
-Common stock 18,160 19,005
-Additional paid-in capital 83,436 102,427
-Capital surplus 6,842
-Retained earnings (deficit) 12,175 (4,078)
-Cumulative translation adjustment (20,618) (33,325)
--------------------------------
Total shareholders' equity 93,153 90,871
--------------------------------
169,316 178,623
================================
</TABLE>
-3-
<PAGE> 4
XEIKON N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands of US dollars, except
share and per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
-------------------------------------------------------
1999 2000 1999 2000
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $52,893 $41,524 $139,403 $133,244
Cost of revenues $33,530 $31,389 $87,441 $94,358
-------------------------------------------------------
Gross profit $19,363 $10,135 $51,962 $38,886
-------------------------------------------------------
Operating expenses :
-Research and development $5,191 $7,281 $14,401 $19,688
-Acquired in-process research and development $0 $1,500 $471 $1,500
-Selling, general and administrative $9,203 $10,860 $22,569 $31,393
-Nonrecurring charge $5,338 $0 $5,338
-------------------------------------------------------
Total operating expenses $14,394 $24,979 $37,441 $57,919
-------------------------------------------------------
Operating income/(loss) $4,969 ($14,844) $14,521 ($19,033)
Other income, net $77 $1,087 $586 $1,885
-------------------------------------------------------
Income/(loss) before provision of income taxes and minority $5,046 ($13,757) $15,107 ($17,148)
interest
-------------------------------------------------------
Provisions for income taxes ($1,980) $1,407 ($6,325) $895
-------------------------------------------------------
Income / (loss) before minority interest $3,066 ($12,350) $8,782 ($16,253)
-------------------------------------------------------
Minority interest $148 $0 $82 $0
Net income / (loss) $3,214 ($12,350) $8,864 ($16,253)
-------------------------------------------------------
Shares Shares Shares Shares
------ ------ ------ ------
Weighted average number of common shares 28,851,924 30,619,931 28,690,035 29,460,639
outstanding (basic)
Basic earnings per share amount $0.11 ($0.40) $0.31 ($0.55)
------ ------- ------ -------
Impact of :
Warrants issued to non employees 0 123,444 0
Warrants issued to employees 92,794 0 110,632 0
Weighted average number of common shares 28,944,718 30,619,931 28,924,111 29,460,639
---------- ---------- ---------- ----------
outstanding (diluted)
Diluted earnings per share amount $0.11 ($0.40) $0.31 ($0.55)
------ ------- ------ -------
</TABLE>
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<PAGE> 5
XEIKON N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands of US dollars)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
---------------------------------
1999 2000
---- ----
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES :
NET INCOME $9,693 ($16,253)
ADJUSTMENTS TO RECONCILE CASH (USED IN)
PROVIDED BY OPERATING ACTIVITIES :
-Deferred tax - (964)
-Depreciation and amortization 69 3,342
-Amortization in-process research and development 471 1,509
-Pension obligations 44 (230)
-Minority interest - (1,409)
-Changes in operating assets and liabilities (751)
Accounts receivable - 7,450
Accounts receivable from related parties - 2,800
Inventory - (1,012)
Prepaid expenses - (371)
Accounts payable - 1,396
Due to related parties - 1,065
Accrued expenses - 3,766
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES 9,526 1,089
CASH FLOWS FROM INVESTING ACTIVITIES :
-Purchase of property and equipment (1,878) (375)
-Acquisition of subsidiary, net of cash acquired (15,823) (1,509)
-Other investment (5,157) 2,279
NET CASH USED IN INVESTING ACTIVITIES (22,858) 395
CASH FLOWS FROM FINANCING ACTIVITIES :
-Proceeds from notes payable to banks 1,249 7,780
-Net borrowings (repayments) under notes payable to related parties 2,045 (1,180)
-Advances to affiliates and other - 2,243
-Refundable research grants - (30)
-Payments under capital lease obligation - -
-Capital surplus -
-Proceeds from issuance of common stock 1,354 106
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 4,648 8,919
Foreign exchange effect on net equity (9,141) (10,508)
---------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (17,825) (105)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 31,823 9,237
---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 10,801 9,133
---------------------------------------------------------------------------------------------------------
Interest paid during the period 85 373
Tax paid during the period 4,829 0
---------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 6
XEIKON N.V.
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME/(LOSS) AND SHAREHOLDERS' EQUITY
( All amounts in Thousands of US Dollars, Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
Total Comprehensive Accumulated Accumulated Common
Shareholders Income/(Loss) Profit/(Loss) Other Shares
Equity Comprehensive
Income/(Loss)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $68,184 - ($18,889) ($12,623) 28,473,100
Net income 16,201 16,201 16,201 - -
Other comprehensive income -
foreign currency translation 4,519 4,519 - 4,519 -
Comprehensive income - 20,720 - - -
Exercise of stock options 440 - - - 54,001
-------------------------------------------------------------------------------
Balance, December 31, 1998 $89,344 - ($2,688) ($8,104) 28,527,101
===============================================================================
Net income 14,863 14,863 14,863 - -
Other comprehensive income -
foreign currency translation (12,514) (12,514) - (12,514) -
Comprehensive income - 2,349 - - -
Exercise of stock options 422 - - - 49,097
Exercise of warrants 1,038 - - - 288,800
-------------------------------------------------------------------------------
Balance, December 31, 1999 $93,153 - $12,175 ($20,618) 28,864,998
===============================================================================
(audited)
Net income (4,193) (4,193) (4,193) - -
Other comprehensive income -
foreign currency translation (3,780) (3,780) - (3,780) -
Comprehensive income - (7,973) - - -
Exercise of stock options - - - - -
Exercise of warrants - - - - -
-------------------------------------------------------------------------------
Balance, March 31, 2000 $85,180 - $7,982 ($24,398) 28,864,998
===============================================================================
Net income 291 291 291 - -
Other comprehensive income -
foreign currency translation (534) (534) - (534) -
Comprehensive income - (243) - - -
Capital increase 19,731 1,751,741
Capital surplus 6,842
Exercise of stock options - - - - -
Exercise of warrants - - - - -
-------------------------------------------------------------------------------
Balance, June 30, 2000 $111,510 - $8,273 ($24,932) 30,616,739
===============================================================================
Net income (12,350) (12,350) (12,350) - -
Other comprehensive income -
foreign currency translation (8,394) (8,394) - (8,394) -
Comprehensive income - (20,744) - - -
Capital increase 105 16,316
Capital surplus -
Exercise of stock options - - - - -
Exercise of warrants - - - - -
-------------------------------------------------------------------------------
Balance, September 30, 2000 $90,871 - ($4,077) ($33,326) 30,633,055
===============================================================================
<CAPTION>
Capital Additional
Amount Surplus Paid-in
Capital
------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1997 $17,949 $81,747
Net income - -
Other comprehensive income -
foreign currency translation - -
Comprehensive income - -
Exercise of stock options 31 409
------------------------------------
Balance, December 31, 1998 $17,980 $82,156
====================================
Net income - -
Other comprehensive income -
foreign currency translation - -
Comprehensive income - -
Exercise of stock options 26 396
Exercise of warrants 154 884
------------------------------------
Balance, December 31, 1999 $18,160 $83,436
====================================
(audited)
Net income - -
Other comprehensive income -
foreign currency translation - -
Comprehensive income - -
Exercise of stock options - -
Exercise of warrants - -
------------------------------------
Balance, March 31, 2000 $18,160 $83,436
====================================
Net income - -
Other comprehensive income -
foreign currency translation - -
Comprehensive income - -
Capital increase 837 18,894
Capital surplus 6,842
Exercise of stock options - -
Exercise of warrants - -
------------------------------------
Balance, June 30, 2000 18,997 6,842 102,330
====================================
Net income - -
Other comprehensive income -
foreign currency translation - -
Comprehensive income - -
Capital increase 8 97
Capital surplus -
Exercise of stock options - -
Exercise of warrants - -
------------------------------------
Balance, September 30, 2000 19,005 6,842 102,427
====================================
</TABLE>
<PAGE> 7
XEIKON N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Xeikon N.V., a Belgian corporation, (the "Company") was established in
1988 and develops, manufactures and markets an innovative digital color printing
system specifically designed to meet the speed, quality, reliability, cost,
variable content and on demand requirements of the short run color printing
market.
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and include, in the opinion of management,
all adjustments, consisting of normal, recurring adjustments, necessary for a
fair presentation of interim period results. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The results for the interim periods
presented are not necessarily indicative of results to be expected for any
future period. These condensed financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's Annual Report to Shareholders for the fiscal year ended December
31, 1999, filed with the Securities and Exchange Commission on Form 20-F dated
June 30, 2000.
2. INVENTORY
Inventory is comprised of material, labor and manufacturing overhead,
and is stated at the lower of cost (determined on a weighted average basis) or
net realizable value. Management performs periodic reviews of inventory and
provides reserves for excess and obsolete inventory or disposes of such
inventory. Inventory consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
--------------------------------------------
(audited) (unaudited)
<S> <C> <C>
Raw materials................................................ $ 22,880 $ 29,233
Work-in-Process.............................................. 6,378 6,898
Finished Goods............................................... 18,847 18,782
Goods purchased for resale (consumables)..................... 7,939 6,297
--------------------------------------------
$ 56,044 $ 61,210
============================================
</TABLE>
3. EARNINGS PER SHARE
Basic net income/(loss) per share is computed by dividing net
income/(loss) by the weighted average number of common shares outstanding during
the period. Diluted net income/(loss) per share is computed by dividing net
income/(loss) by the weighted average number of common and common equivalent
shares outstanding during the period. Given the net loss for the 9 months ended
September 30, 2000 there is no dilutive effect on the loss per share.
<PAGE> 8
4. INVESTMENT
On March 4, 1999, Xeikon entered into a Securities Acquisition
Agreement with Varis Corporation, a company engaged in the design, development,
manufacture and marketing of controllers and systems for use with electronic
print engines. Under the terms of the agreement, Xeikon purchased 1,617.25
shares of Series B Preferred Stock of Varis for $2,500,000. Contemporaneously
with its purchase of the Series B Preferred Stock, Xeikon provided a $3,000,000
loan to Varis in return for a promissory note, bearing interest at the Prime
Rate plus 2.5%, which is due on March 4, 2001. Xeikon may extend the maturity
date of the promissory note for one year in exchange for a warrant to acquire an
additional 64.69 shares of Series B Preferred Stock. In view of the uncertain
future operations of Varis Corporation, the Company elected to register an
impairment of the total investment amounting to $5.3 million valuated at the
actual exchange rate. This is separately reflected as a non-recurring charge in
the Condensed Consolidated Statement of Operations of the Company.
On April 21, 1999, the Company acquired from Bull Europe Centrale et
Oriental S.A. ("Bull") 80% of the outstanding shares of Nipson International
S.A. ("Nipson International"), a limited liability company organized under
French law. The purchase price was 96,000,000 French Francs ("FF")
(approximately U.S. $15.8 million, or 71.11 per share.)
Until April 21, 2001, Xeikon has the right to acquire the remaining 20%
of Nipson International (337,500 shares) from Bull or Dai Nippon Printing, a
permitted transferee of 10% of the shares, for a price per share equal to 71.11
FF per share plus interest calculated from April 21, 1999 in an amount equal to
EURIBOR (three months) plus 1% through the date of acquisition (the "Purchase
Price"). If Xeikon does not exercise its option, the holder(s) of the 20%
minority interest may require Xeikon, during the period beginning April 22, 2001
and ending October 21, 2001, to purchase all or part of their shares at a per
share price equal to the Purchase Price.
The acquisition of Nipson International was accounted for as a
purchase. Accordingly, the purchase price was allocated to the net assets
acquired based upon their estimated fair market values. The excess purchase
price over the estimated fair value of net assets acquired amounted to
approximately $7.0 million, which has been accounted for as goodwill and is
being amortized over 10 years using the straight line method. The accompanying
consolidated statements of income reflect the operating results of Nipson since
the acquisition. Pro forma unaudited consolidated operating results of the
Company and Nipson for the nine months ended September 30, 1999, assuming the
acquisition had been made as of January 1, 1999, are summarized below (in
thousands of US dollars except per share amounts):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1999
------------------
<S> <C>
(unaudited)
Net sales............................................ $ 155,678
Net income (loss).................................... $ 6,344
Basic earnings/(loss) per share...................... $ 0.22
Diluted earnings/(loss) per share $.................. $ 0.22
</TABLE>
These pro forma results have been prepared for comparative purposes
only and include certain adjustments such as additional depreciation expense as
a result of a step-up in the basis of fixed assets, additional amortization
expense as a result of goodwill and other intangible assets. They do not purport
to be indicative of the results of operations which actually would have resulted
had the combination been in effect on January 1, 1999 or of future results of
operations of the consolidated entities.
In connection with the acquisition from Bull, Xeikon assumed two
intercompany loans of Nipson International and its wholly owned subsidiary
Nipson Printing Systems, Inc. in the amount of 70,000,000
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<PAGE> 9
FF and US $2,321,000, respectively. Xeikon has agreed to cause the first such
loan to be repaid in six equal semi-annual installments over a three year period
beginning April 21, 2002. This loan bears interest at 1% above the EURIBOR
(three months). The second loan will be repaid in two equal annual installments
over a two-year period beginning April 21, 2005 and does not bear interest.
Bull has agreed to indemnify Xeikon until April 21, 2001 for breaches
of customary representations and warranties subject to a maximum indemnification
amount of 35,000,000 FF. The Company introduced claims for indemnification
towards Bull for approximately 35,000,000 FF (approximately $5 million), under
the agreement and has recorded such claim as a receivable. The set up of this
receivable was registered against goodwill in the second quarter of 2000.
5. SEGMENT AND GEOGRAPHIC INFORMATION
The Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information in the fiscal year ended December 31, 1998.
SFAS 131 establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS 131 also establishes standards for related disclosures about
products and services and geographic areas. Operating segments are identified as
components of an enterprise about which separate discrete financial information
is available for evaluation by the chief operating decision maker, or decision
making group, in making decisions how to allocate resources and assess
performance. The Company's chief decision maker, as defined under SFAS 131, is a
combination of the Chief Executive Officer, and the Chief Financial Officer. The
Company has viewed its operations and manages its business as principally two
segments, the sale of printing systems and options and the sale of consumables,
spares, tools and others. The accounting policies of the segments are the same
as those described in the summary of significant accounting policies. There are
no intersegment sales and transfers. The segment revenues and cost of revenues
are as follows :
<TABLE>
<CAPTION>
CONSOLIDATED XEIKON GROUP Three Months Nine Months
ended September 30, ended September 30,
--------------------------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Systems and options
Revenues $20,643 $30,245 $69,797 $88,780
Cost of revenues $14,817 18,344 $44,198 53,769
Gross Profit 5,826 11,901 25,599 35,011
Gross Margin 28% 39% 37% 39%
Consumables, spares, tools and other
Revenues $20,881 $22,648 $63,447 $50,623
Cost of revenues 16,572 15,186 50,160 33,672
Gross Profit 4,309 7,462 13,287 16,951
Gross Margin 21% 33% 21% 33%
Total
Revenues $41,524 $52,893 $133,244 $139,403
Cost of revenues 31,389 33,530 94,358 87,441
Gross Profit 10,135 19,363 38,886 51,962
</TABLE>
-9-
<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C>
Gross Margin 24% 37% 29% 37%
Revenues by geographic area :
-United States $9,988 $20,014 $44,343 $51,342
-Rest of Europe 6,374 8,353 17,525 19,631
-Belgium 1,110 3,006 8,672 15,253
-The Netherlands 6,493 9,768 19,242 24,643
-United Kingdom 3,001 3,055 7,752 7,434
-Germany 9,142 4,659 23,731 12,007
-Other 5,416 4,038 11,979 9,093
--------------------------------------------------------------
$41,524 $52,893 $133,244 $139,403
==============================================================
As a percentage of total revenue :
-United States 24.05% 37.84% 33.28% 36.83%
-Rest of Europe 15.35% 15.79% 13.15% 14.08%
-Belgium 2.67% 5.68% 6.51% 10.94%
-The Netherlands 15.64% 18.47% 14.44% 17.68%
-United Kingdom 7.23% 5.78% 5.82% 5.33%
-Germany 22.02% 8.81% 17.81% 8.61%
-Other 13.04% 7.63% 8.99% 6.53%
--------------------------------------------------------------
100.00% 100.00% 100.00% 100.00%
==============================================================
</TABLE>
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<PAGE> 11
<TABLE>
<CAPTION>
COLOR Three Months Nine Months
ended September 30, ended September 30,
--------------------------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Systems and options
Revenues $14,727 $24,411 $50,970 $77,603
Cost of revenues 11,529 14,857 33,162 47,861
Gross Profit 3,198 9,554 17,808 29,742
Gross Margin 22% 39% 35% 38%
Consumables, spares, tools and other
Revenues $13,691 $14,513 $40,711 $36,401
Cost of revenues 8,564 9,560 28,060 23,624
Gross Profit 5,127 4,953 12,651 12,777
Gross Margin 37% 34% 31% 35%
Total
Revenues $28,418 $38,924 $91,681 $114,004
Cost of revenues 20,093 24,417 61,222 71,485
Gross Profit 8,325 14,507 30,459 42,519
Gross Margin 29% 37% 33% 37%
Revenues by geographic area :
-United States $7,017 $16,350 $33,299 $45,846
-Rest of Europe 2,001 2,940 5,325 10,161
-Belgium 1,126 2,899 7,842 15,045
-The Netherlands 6,435 9,671 18,856 24,206
-United Kingdom 1,805 1,403 3,590 4,267
-Germany 7,645 3,402 18,042 9,087
-Other 2,389 2,259 4,727 5,392
--------------------------------------------------------------
$28,418 $38,924 $91,681 $114,004
==============================================================
As a percentage of total revenue :
-United States 24.69% 42.00% 36.32% 40.21%
-Rest of Europe 7.04% 7.55% 5.81% 8.91%
-Belgium 3.96% 7.45% 8.55% 13.20%
-The Netherlands 22.64% 24.85% 20.57% 21.23%
-United Kingdom 6.35% 3.60% 3.92% 3.74%
-Germany 26.90% 8.74% 19.68% 7.97%
-Other 8.42% 5.81% 5.15% 4.74%
--------------------------------------------------------------
100.00% 100.00% 100.00% 100.00%
==============================================================
</TABLE>
-11-
<PAGE> 12
<TABLE>
<CAPTION>
BLACK AND WHITE Three Months Nine Months
ended September 30, ended September 30,
-------------------------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Systems and options
Revenues $5,916 $5,834 $18,827 $11,177
Cost of revenues 3,288 3,487 11,036 5,908
Gross Profit 2,628 2,347 7,791 5,269
Gross Margin 44% 40% 41% 47%
Consumables, spares, tools and other
Revenues $7,190 $8,135 $22,736 $14,222
Cost of revenues 8,008 5,626 22,100 10,048
Gross Profit -818 2,509 636 4,174
Gross Margin -11% 31% 3% 29%
Total
Revenues $13,106 $13,969 $41,563 $25,399
Cost of revenues 11,296 9,113 33,136 15,956
Gross Profit 1,810 4,856 8,427 9,443
Gross Margin 14% 35% 20% 37%
Revenues by geographic area :
-United States $2,971 $3,664 $11,044 $5,496
-Rest of Europe 4,373 5,413 12,200 9,470
-Belgium -16 107 830 208
-The Netherlands 58 97 386 437
-United Kingdom 1,196 1,652 4,162 3,167
-Germany 1,497 1,257 5,689 2,920
-Other 3,027 1,779 7,252 3,701
-------------------------------------------------------------
$13,106 $13,969 $41,563 $25,399
=============================================================
As a percentage of total revenue :
-United States 22.67% 26.23% 26.57% 21.64%
-Rest of Europe 33.37% 38.75% 29.35% 37.28%
-Belgium -0.12% 0.77% 2.00% 0.82%
-The Netherlands 0.44% 0.69% 0.93% 1.72%
-United Kingdom 9.13% 11.83% 10.01% 12.47%
-Germany 11.42% 9.00% 13.69% 11.50%
-Other 23.09% 12.73% 17.45% 14.57%
-------------------------------------------------------------
100.00% 100.00% 100.00% 100.00%
=============================================================
</TABLE>
6. ACQUISITION
On June 30, 2000, Xeikon N.V. and Agfa signed a transfer agreement to
transfer the digital printing systems ("DPS") business of Agfa to Xeikon N.V..
Agfa received 1,751,741 newly issued restricted shares of Xeikon N.V. and any
amount in excess of the share component of the purchase price of the transaction
was and will be paid in cash. This transaction resulted in a capital increase of
$19,731 and a capital surplus of $6,842, representing the difference between the
fair market value of the shares and the par value of the assets. The excess
purchase price over the estimated fair value of net assets acquired is accounted
for as goodwill and is being amortized over 10 years using the straight line
method. The transferred business assets of Agfa include toner, developer and
digital front end technology, intellectual property and manufacturing operations
- including a manufacturing facility in Heultje, Belgium - research and
development staff, as well as the Belgium based marketing and support staff and
a sales and service organization based mostly in Europe, North America and
Japan.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain of the statements included in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" as well as elsewhere
in this report on Form 6-K are forward-looking statements. These statements
involve risks and uncertainties that could cause the actual results to differ
materially from those expressed in or implied by such statements. These
statements should be read in the context of those factors discussed under the
heading "Risk Factors" in the Company's Annual Report on Form 20-F for the
fiscal year ended December 31, 1999 filed with the Securities and Exchange
Commission on June 30, 2000.
OVERVIEW
On April 21, 1999, the Company acquired from Bull 80% of the
outstanding shares of Nipson International. Nipson International is a
manufacturer of digital black and white printers. The purchase price consisted
of cash equal to 96,000,000 French Francs ("FF") (approximately US $15.8
million), or 71.11 FF per share. Xeikon has the right (which expires April 21,
2001) to acquire the remaining 20% of Nipson International (337,500 shares) for
71.11 FF per share plus interest calculated from April 21, 1999 at a rate equal
to EURIBOR (three months) plus 1% through the date of acquisition (the "Purchase
Price"). In addition, the holder(s) of the 20% minority interest may require
Xeikon to purchase all or part of their shares at a per share price equal to the
Purchase Price during the six month period beginning April 22, 2001. In
connection with the acquisition, Xeikon assumed two intercompany loans in the
aggregate principal amount of approximately $11.6 million. See "-- Liquidity and
Capital Resources."
On June 30, 2000, Xeikon N.V. and Agfa signed a transfer agreement to
transfer the digital printing systems ("DPS") business of Agfa to Xeikon N.V..
Agfa received 1,751,741 newly issued restricted shares of Xeikon N.V. and any
amount in excess of the share component of the purchase price of the transaction
was and will be paid in cash. This transaction resulted in a capital increase of
$19,731 and a capital surplus of $6,842, representing the difference between the
fair market value and the net book value of the assets. The transferred business
assets of Agfa include toner, developer and digital front end technology,
intellectual property and manufacturing operations - including a manufacturing
facility in Heultje, Belgium - research and development staff, as well as the
Belgium based marketing and support staff and a sales and service organization
based mostly in Europe, North America and Japan.
BUSINESS SEGMENTS
Xeikon has two reportable business segments :
- Color (digital color presses and related consumables, parts
and service)
- B & W (black and white presses and related consumables, parts
and service)
EFFECTS OF CURRENCY CHANGES
Xeikon's functional currency is the Euro. When translated into US
dollars, Xeikon's revenues and net income are negatively affected by the
appreciation in the value of the US dollar against the Euro between the third
quarter of 1999 and the third quarter of 2000. The US dollar was 16% higher
against the Euro for the third quarter of 2000 than for the third quarter of
1999. The Nipson functional currency is the French Franc. Since the French Franc
and Euro are linked, the impact of the Dollar versus Euro or French Franc is
similar.
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RESULTS OF OPERATIONS
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2000 COMPARED TO THREE-MONTH PERIOD
ENDED SEPTEMBER 30, 1999
Revenues. Revenues decreased 21% from $52.9 million for the three-month
period ended September 30, 1999 to $41.5 million for the three-month period
ended September 30, 2000. Revenues were principally affected by (1) the slowdown
in equipment revenues, (2) the delay in the first commercial shipments of the
new CSP, and (3) the decrease of shipments in the OEM channel. Revenues were
also affected by currency changes noted above. Revenues from consumables, spare
parts and other decreased 8% from $22.6 million during the third quarter of 1999
to $20.9 million for the third quarter of 2000.
Cost of Revenues. Cost of revenues decreased 6% from $33.5 million in
the third quarter of 1999 to $31.4 million in the third quarter of 2000. The
decrease is the net effect of currency changes noted above, and lower equipment
shipments. Cost of revenues includes aggregate royalties of $0.1 million for the
three-month period ended September 30, 1999 payable to Xerox.
Gross Profit. Gross profit decreased 48% from $19.4 million for the
third quarter of 1999 to $10.1 million for the third quarter of 2000. Gross
margin for printing systems and options decreased from 39% of revenue in the
1999 quarter to 28% of revenue in the 2000 quarter. Gross margin for the segment
consumables, spares tools and other decreased from 33% of revenue in the 1999
quarter to 21% of revenue in the 2000 quarter. The decrease in total gross
margin is due to the factors affecting revenues noted above.
Research and Development. Research and development expenses increased
40% from $5.2 million in the third quarter of 1999 to $7.3 million in the third
quarter of 2000. Research and development expenses was 10% of revenues in the
third quarter of 1999 and 18% in the third quarter of 2000. The increased ratio
for the 2000 quarter is mainly explained by (1) the lower equipment revenues
generated during this quarter, and (2) the incorporation of the digital front
end research department as a result of the Agfa DPS acquisition. In relation to
the Agfa DPS acquisition a one time charge of acquired in-process research and
development was registered during the 2000 quarter. This charge is subject to
review after the final valuation of the independent appraiser is received.
Selling, General and Administrative. Selling, general and
administrative expenses increased to $10.9 million in the third quarter of 2000
from $9.2 million in the 1999 quarter. This increase is mainly due to the
incorporation of the Agfa DPS division and the result of the Nipson activities.
During the 2000 quarter a non-recurring charge of $5.3 million was recorded
related to the Varis investment.
Other Income (Expense). Other income was $0.1 million for the third
quarter of 1999 and $1.1 million for the third quarter of 2000. Other income
consists mainly of exchange rate differences.
Income Taxes. The Company had a net income before taxes and minorities
of $5.0 million for the three-month period ended September 30, 1999 and a net
loss before taxes and minorities of $13.8 million for the three-month period
ended September 30, 2000. In the 1999 period the Company set up a provision for
income tax in the amount of $2.0 million and reversed the tax provision of $ 1.4
million for the 2000 period.
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NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2000 COMPARED TO NINE-MONTH PERIOD ENDED
SEPTEMBER 30, 1999
Revenues. Revenues decreased 4% from $139.4 million for the nine-month
period ended September 30, 1999 to $133.2 million for the nine-month period
ended September 30, 2000. Lower revenues were the result of (1) the decreased
deliveries in the OEM channel, (2) the start-up of MAN Roland as a new OEM
partner replacing Agfa Gevaert, and (3) the negative evolution of the Euro
versus the US Dollar. Revenues from consumables and spare parts increased 25%
from $50.6 million in the 1999 period to $63.4 million in the 2000 period,
principally because of higher print activity in the market in combination with
marketing programs, the increase in the installed base, and the impact of the
Black & White market segment. Based on revenues generated in both the 1999 and
2000 periods ended September 30, 1999 and September 30, 2000, Xerox and Agfa
were the Company's largest customers. In the 1999 period Xerox represented 30%
of the total revenues and Agfa represented 12%. For the 2000 period Xerox
accounted for 16% of the total revenues of the Company and Agfa represented 4%.
Cost of Revenues. Cost of revenues increased 8% from $87.4 million in
the 1999 period to $94.4 million in the 2000 period. The increase is due to the
Nipson acquisition noted above, a change in the product mix and the decrease in
the OEM channel. Cost of revenues includes aggregate royalties of $0.2 million
payable to Xerox for the nine-month period ended September 30, 1999 payable to
Xerox.
Gross Profit. Gross profit decreased 25% from $52 million for the 1999
period to $38.9 million for the 2000 period. Gross margin detoriorated from 37%
of revenue in the 1999 period to 29% of revenue in the 2000 period. The decrease
in gross margin was due to the factors affecting revenues and cost of revenues,
noted above, the decrease in gross profit for the black and white segment, and
the decrease in consumable market prices.
Research and Development. Research and development expenses, excluding
acquired in-process research and development, increased 37% from $14.4 million
in the 1999 period to $19.7 million in the 2000 period. Research and development
expenses were 10% of revenues in the 1999 period and 15% of revenues in the 2000
period. Acquired in-process Research and Development represents the value
assigned in a purchase business combination to research and development projects
of the acquired business that were commenced but not yet completed at the date
of acquisition and which, if unsuccessful, have no alternative future use in
research and development activities or otherwise. In accordance with SFAS No. 2
"Accounting for Research and Development Costs" amounts assigned to purchased
in-process research and development meeting the above criteria must be charged
to expense at the date of consummation of the purchase business combination. As
a result, a charge of $0.5 million was recorded for the 1999 period and a charge
of $1.5 million was recorded for the 2000 period. This allocation was based on
preliminary estimates and may be revised at a later date. This item is reflected
separately on the Condensed Consolidated Statements of Operations.
Selling, General and Administrative. Selling, general and
administrative expenses, excluding the non-recurring charges, increased 39% from
$22.6 million in the 1999 period to $31.4 million in the 2000 period. The
increase is mainly attributable to sales and marketing expenses, especially
advertising and several trade shows, and the impact of the Nipson segment.
During the 2000 period a non-recurring charge of $5.3 million was recorded
related to the Varis investment.
Other Income (Expense). Other income (expense) was $0.6 million in the
1999 period and $1.9 million for the 2000 period. The other income for both
periods is mainly attributable to the interest income and exchange rate
differences.
Income Taxes. The Company had an income before taxes of $15.1 million
for the nine-month period of 1999 and a loss of $17.1 million for the nine-month
period of 2000. In the 1999 period the
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Company set up a provision for income tax in the amount of $6.3 million and a
reversal of the income tax provision of $0.9 million for the nine-month period
of 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities produced cash of $11 million during
the nine-month period ended September 30, 2000.
At September 30, 2000, the Company had $9.1 million in cash and cash
equivalents. The Company uses its credit line facilities in the event that its
liquidity needs are not met by its then available cash. At September 30, 2000,
the Company's notes payable to banks amounted to $16.5 million. At the moment of
filing the unused creditlines amount up to $17 million up from $7 million at the
end of the second quarter of 2000.
In April 1999, Xeikon used approximately $15.8 million in cash to fund
its acquisition of an 80% interest in Nipson International. Xeikon has the
option to acquire the remaining 20% of Nipson International (337,500 shares) for
a price per share equal to 71.11 FF plus interest calculated from April 21, 1999
in an amount equal to EURIBOR (three months) plus 1% through the date of
acquisition (the "Purchase Price"). If Xeikon does not exercise this option, the
holder(s) of the 20% minority interest may require Xeikon, during the period
beginning April 22, 2001 and ending October 21, 2001, to purchase all or part of
their shares at a per share price equal to the Purchase Price.
In connection with the Nipson acquisition, Xeikon assumed two
intercompany loans of Nipson International and its wholly owned subsidiary
Nipson Printing Systems, Inc. from Bull, in the amount of 70,000,000 FF and US
$2,321,000, respectively. Xeikon has agreed to cause the first such loan to be
repaid in six equal semi-annual installments over a three year period beginning
April 21, 2002. This loan will bear interest at 1% above the EURIBOR (three
months). The second loan will be repaid in two equal annual installments over a
two-year period beginning April 21, 2005 and will not bear interest.
In connection with the acquisition of the land for expansion of its
manufacturing facilities, the Company assumed a roll over credit facility of
Euro 3 million as of July 1, 1999, bearing interest at the Euribor rate plus
0.20%.
On July 27, 2000, the Company signed an off balance lease agreement (reviewed by
the Company's auditor) for a new plant building in Lier for an amount of $28
million with quarterly payments (from the completion date foreseen as of March
31, 2002) for a 15 year period with a purchase option. The interest rate is
EURIBOR 3 months minus a discount (+5.6%).
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company is the Euro (EUR) and the French
Franc, which is directly linked to the Euro, for Nipson, but the Company has
elected to present the financial statements in US dollars. The financial
statements of the Company are translated from its functional currency, (the
Euro), into the reporting currency, the US dollar, utilizing the current rate
method. All cumulative translation gains or losses from the translation into the
Company's reporting currency are included as a separate component of
shareholders' equity in the accompanying balance sheet. The change in the
cumulative translation adjustment reflects the strengthening of the US dollar
against the EUR between December 31, 1999 and September 30, 2000. The exchange
rate was US $1.00 for EUR 0.995 at December 31, 1999 and US $1.00 for EUR 1.14
at September 30, 2000.
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ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 6-K
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
XEIKON N.V.
Date : November 15, 2000 By: /s/ Alfons Buts
---------------------------------
Alfons Buts, President and Chief
Executive Officer
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