SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 21, 1995
X-RITE, INCORPORATED
(Exact name of registrant as specified in its charter)
Michigan
(State or other jurisdiction of incorporation)
0-14800 38-1737300
(Commission File Number) (IRS Employer Identification No.)
3100 44th Street, S.W., Grandville, Michigan 49418
(Address and Zip Code of Principal Executive Offices)
(616) 534-7663
(Registrant's Telephone Number, Including Area Code)
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other current portions of its Current Report on
Form 8-K related to the events occurring on February 21, 1995, as set forth
in the pages attached hereto.
Item 7. Financial Statements, Pro Forma Condensed Consolidated Financial
Statements and Exhibits
(a) Financial statements of the business acquired:
LABSPHERE, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND 1993
TOGETHER WITH AUDITORS' REPORT
Report of Independent Public Accountants
To X-Rite, Incorporated:
We have audited the accompanying balance sheet of Labsphere, Inc. (a new
Hampshire corporation) as of December 31, 1994, and the related statements of
income, shareholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit. The financial statements of Labsphere, Inc. as of
December 31, 1993 were audited by other auditors whose report, dated
February 14, 1994, expressed an unqualified opinion on those statements.
We conducted our audit 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 audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Labsphere, Inc. as of
December 31, 1994, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Grand Rapids, Michigan
January 26, 1995 Independent Auditors' Report
To the Stockholders and Directors
Labsphere, Inc.
North Sutton, New Hampshire
We have audited the accompanying balance sheet of Labsphere, Inc. as of
December 31, 1993, and the related statements of income and retained
earnings, and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Labsphere, Inc. as of
December 31, 1993, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
/s/ John W. Pierzchala & Associates
February 14, 1994
<TABLE>
<CAPTION> Labsphere, inc.
Balance Sheets - December 31, 1994 and 1993
Assets 1994 1993
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 5,333 $ 9,011
Accounts receivable net of allowance of
$13,000 in 1994 and $0 in 1993 1,867,609 1,586,408
Inventories 984,237 532,369
Prepaid expenses 105,255 146,342
Prepaid income taxes 21,600 5,048
Total current assets $2,984,034 $2,279,178
Property, Plant and Equipment, net $2,135,837 $1,996,985
Other Assets:
Patents and other intangibles, net
of amortization of $6,717 and $18,811
in 1994 and 1993, respectively $ 136,229 $ 114,565
Total assets $ 5,256,100 $4,390,728
</TABLE>
<TABLE>
<CAPTION> Liabilities and Shareholders' Equity
1994 1993
<S> <C> <C>
Current Liabilities
Note payable to bank $ 325,000 $ 410,000
Current maturities of long-term debt 195,587 181,829
Current maturities of capital lease
obligation 47,508 47,700
Accounts payable 641,810 383,853
Accrued expenses 78,662 27,115
Accrued payroll 105,077 22,456
Income taxes payable 50,644 134,835
Total current liabilities $ 1,444,308 $ 1,207,788
Long-Term Debt, net of current
maturities $ 1,739,031 $ 1,421,548
Long-Term Debt to Shareholders $ 360,000 $ 360,000
Capital Lease Obligation, net of current
maturities $ 79,110 $ 52,445
Deferred Income Taxes $ 59,000 $ 51,559
Commitments (Note 9)
Shareholders' Equity
Common stock, $.01 par value-
Authorized-1,500,000 shares
Issued and outstanding-
1,225,000 shares 12,250 12,250
Additional paid-in capital 337,157 337,157
Retained earnings 1,225,244 $ 947,981
Total shareholders' equity $ 1,574,651 $ 1,297,388
Total liabilities and
shareholders' equity $ 5,256,100 $ 4,390,728
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION> LABSPHERE, INC.
Statements of Income
For the Years Ended December 31, 1994 and 1993
1994 1993
<S> <C> <C>
NET SALES $6,943,502 $6,029,932
Cost of Sales 2,760,561 2,486,283
Gross margin 4,182,941 3,543,649
Operating Expenses:
Selling 1,345,600 1,022,663
General and administrative 1,154,912 963,821
Research and development 958,625 696,441
3,459,137 2,682,925
Operating income 723,804 860,724
Interest Expense 253,541 232,573
Income before provision for income taxes 470,263 628,151
Provision For Income Taxes 193,000 215,934
Income before cumulative effect of
adopting SFAS No. 109 277,263 412,217
Cumulative Effect of Adopting SFAS No. 109 - 14,981
Net income $ 277,263 $ 427,198
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION> LABSPHERE, INC.
Statements of Shareholders' Equity
For the Years Ended December 31, 1994 and 1993
Additional Total
Common Stock Paid-in Retained Shareholders'
Shares Amount Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1992 1,225,000 $12,250 $337,157 $ 555,283 $ 904,690
Net income - - - 427,198 427,198
Dividends paid - - - (34,500) (34,500)
Balance,
December 31, 1993 1,225,000 12,250 337,157 947,981 1,297,388
Net income - - - 277,263 277,263
Balance,
December 31, 1994 1,225,000 $12,250 $337,157 $1,225,244 $1,574,651
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION> LABSPHERE, INC.
Statements of CASH FLOWS
For the Years Ended December 31, 1994 and 1993
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 277,263 $ 427,198
Adjustments to reconcile net income
to net cash provided by operating
activities-
Depreciation and amortization 246,985 226,806
Deferred income taxes (16,000) 26,799
Provision for doubtful accounts 118,864 2,388
Changes in assets and liabilities-
Increase in accounts receivable (400,065) (261,083)
Increase in inventories (451,868) (39,499)
Decrease (increase) in prepaid expenses 41,087 (33,516)
Increase in prepaid income taxes (16,552) -
Increase (decrease) in accounts
payable and accrued expenses 392,125 (123,247)
(Decrease) increase in income taxes
payable (60,730) 41,135
Net cash provided by operating activities 131,109 266,981
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (384,431) (133,219)
Expenditures for intangible assets (23,070) (21,633)
Net cash used in investing activities (407,501) (154,852)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowing under
line-of-credit agreement (85,000) 160,000
Principal payments on long-term debt (392,313) (178,347)
Borrowings of long-term debt 807,143 -
Principal payments on capital lease obligation (57,116) (61,952)
Dividends paid - (34,500)
Net cash (used in) provided by financing
activities 272,714 (114,799)
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,678) (2,670)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 9,011 11,681
CASH AND CASH EQUIVALENTS, END OF YEAR $ 5,333 $ 9,011
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for-
Taxes $ 291,330 $ 94,868
Interest 241,673 232,125
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS:
Equipment acquired under capital lease $ 83,589 $ 63,822
Increase in capital lease obligation (83,589) (63,822)
The accompanying notes are an integral part of these financial statements.
</TABLE>
LABSPHERE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
(1) OPERATIONS
Labsphere, Inc. (the Company), manufactures integrating spheres and related
instrumentation and components. The Company is 90% owned by Granitech,
Inc., a holding company, whose principal asset is its investment in the
Company.
(2) SIGNIFICANT ACCOUNTING POLICIES
(a) Cash Equivalents
The Company classifies all highly liquid investments with
original maturities of three months as cash and cash equivalents.
(b) Inventories
Inventories are valued at the lower of cost (first-in, first-out)
or market and consist of the following at December 31, 1994 and
1993;
1994 1993
Raw materials $ 627,190 $ 20,290
Work-in-process 97,802 51,832
Finished goods 259,245 160,247
$ 984,237 $ 532,369
Work-in-process and finished goods inventories consist of
materials, labor and manufacturing overhead.
(c) Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Equipment
under capital lease is recorded at the lower of fair market
value or net present value of lease payments.
LABSPHERE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
(Continued)
(2) SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Property, Plant and Equipment (Continued)
Property, plant and equipment consisted of the following at
December 31:
<TABLE>
1994 1993
<C> <C>
Land and land improvements $ 120,002 $ 106,386
Building 1,813,865 1,713,891
Machinery and equipment 920,928 752,170
Equipment under capital lease 349,553 287,590
Office furniture and equipment 160,569 142,615
Vehicle 12,940 12,940
3,377,857 3,015,592
Less - Accumulated depreciation and
amortization 1,242,020 1,018,607
$ 2,135,837 $ 1,996,985
Depreciation and amortization
expense amounted to $246,985 and
$226,806 in 1994 and 1993, respectively.
(d) Other Assets
At December 31, other assets consisted of the following:
1994 1993
Patens pending $ 96,285 $ 76,188
Patents 14,462 14,462
Loan origination fees 11,063 11,063
Long-term deposits 12,423 10,081
Other 8,713 21,585
142,946 133,379
Less - Accumulated amortization 6,717 18,814
</TABLE> $ 136,229 $ 114,565
LABSPHERE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
(Continued)
(2) SIGNIFICANT ACCOUNTING POLICIES (Continued)
(d) Other Assets (Continued)
The patents are being amortized over their estimated useful lives
of seven years. Loan origination fees are amortized over the
life of the loan of 20 years.
Amortization expense for 1994 and 1993 amounted to $1,407 and
$1,404, respectively.
(e) Revenue Recognition
The Company recognizes revenue upon shipment of products. The
Company provides for estimated warranty costs at the time of
shipment.
(f) Postretirement and Post-employment Benefits
The Company has no obligation for postretirement or
post-employment benefits.
(g) Concentration of Credit Risk
Statement of Financial Accounting Standards (SFAS) No. 105,
Disclosure of Information about Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with
Concentration of Credit Risk, requires disclosure of any
significant off-balance-sheet and credit risk concentrations.
The Company has no significant off-balance-sheet concentration
of credit risk such as foreign exchange contracts, option
contracts or other foreign hedging arrangements. The
Company's accounts receivable credit risk is not concentrated
within any geographic area, and in 1994, no single customer
accounts for greater than 10% of revenues or represents a
significant credit risk to the Company. In 1993, two customers
accounted for 24% of total revenues.
(h) Derivative Financial Instruments
The Company does not hold or issue any Derivative Financial
Instruments as defined by SFAS No. 119, Disclosure about
Derivative Financial Instruments and Fair Value of Financial
Instruments.
(i) Reclassifications
Certain amounts in prior year financial statements have been
reclassified to conform with the current year's presentation.
<TABLE>
<CAPTION> LABSPHERE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
(Continued)
(3) LONG-TERM DEBT
Long-term debt, in accordance with SFAS No. 107, Disclosure about Fair
Value of Financial Instruments, is stated at cost, which approximates
its fair market value at December 31, 1994. Long-term debt consisted
of the following at December 31:
1994 1993
<S> <C> <C>
Mortgage payable to a bank, with interest
at prime (8.5% at December 31, 1994)
plus 1.5%, monthly payments of $6,536
principal and interest, due April 2010,
secured by first mortgage on land and
building and guarantee of majority
stockholder $ 685,493 $705,957
Mortgage payable to a bank (SBA guaranteed),
interest at 12.488% per annum, semiannual
payments of $10,931 principal and interest,
due November 1999, secured by second mortgage
on land and building and the guarantee of
shareholders 78,820 89,971
Mortgage payable to a bank (SBA guaranteed),
interest at 9.581% per annum, monthly payments
of $4,695 principal and interest, through
March 2010, secured by third mortgage on land and
building and the guarantee of shareholders.
The note is subject to a prepayment penalty
prior to March 1, 2000 449,757 462,348
Term note payable to a bank, repaid in 1994 - 339,837
Term note payable to a bank, interest at 8.95%,
monthly payments of $16,788 principal and
interest, due April 6, 1999, secured by
essentially all assets of the Company 719,582 -
Note payable to a bank, interest at 11.5% per
annum, monthly payments of $327 principal and
interest, due April 1995, secured by a specific
vehicle 966 4,555
Other installment notes - 709
1,934,618 1,603,377
Less - Current maturities 195,587 181,829
$1,739,031 $1,421,548
</TABLE>
LABSPHERE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
(Continued)
(3) LONG-TERM DEBT (Continued)
Maturities of long-term debt are as follows:
1995 $ 195,594
1996 208,990
1997 229,431
1998 251,892
1999 131,635
Thereafter 917,076
$ 1,934,618
The bank loan agreements restrict stock transactions and payment of
dividends, and limit future borrowings and capital expenditures. It
also requires that certain debt to equity and current ratios be
maintained. The Company obtained a waiver for certain covenants not
met in 1994.
(4) NOTE PAYABLE TO BANK
The Company has a $500,000 working capital line of credit with a bank which
expires on April 1, 1995. There was $325,000 outstanding at December 31,
1994. The available borrowing base under the line is the lesser of
$500,000 or the sum of 75% of eligible accounts receivable, 50% of eligible
inventory, 50% of eligible net book value of equipment and 50% of
non-letter of credit-backed foreign accounts receivable, all as defined.
At December 31, 1994, the available borrowing base was $500,000.
Borrowings are secured by substantially all assets of the Company. The
line bears interest at the prime rare (8.5% at December 31, 1994) plus
1.25%, and is payable monthly. The line is guaranteed by a company which
is the Company's majority stockholder. The Company is also required to
comply with certain financial covenants. At December 31, 1994, the
Company was in compliance with its covenants or a waiver had been obtained
from the bank.
(5) NOTES PAYABLES TO SHAREHOLDERS
The Company has $360,000 in demand notes payable to its shareholders.
These notes are unsecured, accrue interest at 12% and are payable
monthly. These notes are subordinated to substantially all long-term
debt.
<TABLE>
<CAPTION> LABSPHERE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
(Continued)
(6) INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. The
cumulative effect of the change on operating income and net income for
1993 was $14,981. The components of the deferred income taxes consist of
temporary differences between the financial reporting basis and tax basis
of assets and liabilities.
The provision for income taxes consists of the following:
1994 1993
<S> <C> <C>
Current-
Federal $ 171,000 $ 154,616
State 38,000 34,519
209,000 189,135
Deferred-
Federal (13,000) 24,138
State (3,000) 2,661
(16,000) 26,799
Provision for income taxes $ 193,000 $ 215,934
The approximate tax effect of each temporary difference is as follows:
1994 1993
Current deferred taxes assets-
Accounts receivable reserve $ 5,000 $ -
Inventory related 11,000 -
Other nondeductible accruals 5,600 5,048
$ 21,600 $ 5,048
Noncurrent deferred tax liability-
Depreciation $ 59,000 $ 51,559
</TABLE>
<TABLE>
<CAPTION> LABSPHERE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
(Continued)
(6) INCOME TAXES (Continued)
The effective income tax rate varies from the amount computed using the
statutory U.S. income tax rate as follows:
1994 1993
<S> <C> <C>
Federal statutory rate 34.0% 34.0%
Research and development tax credit - (5.7)
State income taxes, net of federal
income tax benefit 4.6 4.6
Other 2.4 (.9)
41.0% 32.0%
(7) CAPITAL LEASE OBLIGATION
The Company leases equipment under leases that meet the criteria of
capital leases under SFAS No. 13.
Future minimum lease payments as of December 31, are as follows:
1995 $ 61,463
1996 44,993
1997 25,612
1998 17,733
1999 4,674
154,475
Less - Amounts representing interest 27,857
Present value of minimum lease payments 126,618
Less - Current maturities 47,508
$ 79,110
</TABLE>
<TABLE>
<CAPTION> LABSPHERE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
(Continued)
(8) CAPITAL STOCK
(a) Stock Split
In April 1993, the Company amended its Articles of Incorporation,
increasing its authorized number of shares from 15,000 to
1,500,000 shares and reducing the par value from $1 to $.01 to
facilitate a 100-for-1 common stock split. The accompanying
financial statements have been retroactively adjusted to
reflect the stock split.
(b) Incentive Stock Option Plan
In 1993, the Company adopted the 1993 Incentive Stock Option Plan
(the Plan). The Plan authorizes the grant of incentive stock
options to key employees for the purchase of common stock at a
price not less than the fair market value at the date of grant.
The Plan also allows for the grant of up to 75,000 shares of
the Company's common stock. The options generally vest over a
four-year period and expire no more than 10 years from the date
of grant. At December 31, 1994, the Company had 10,000
options available for future grant.
A summary of stock option activity for the two-year period ended
December 31, 1994 is as follows:
Number of Options
Shares Price
per Share
<S> <C> <C>
Outstanding, January 1, 1993 - $ -
Granted 10,000 5.00
Outstanding, December 31, 1993 10,000 5.00
Granted 55,000 5.00
Exercised - -
Terminated - -
Outstanding, December 31, 1994 65,000 $ 5.00
Exercisable, December 31, 1994 18,750 $ 5.00
</TABLE>
<TABLE>
<CAPTION> LABSPHERE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
(Continued)
(9) FOREIGN SALES
Unites States and international sales as a percentage of total revenues
are as follows:
1994 1993
<S> <C> <C>
United States 70% 69%
Europe 22 21
Asia 5 8
Other 3 2
100% 100%
</TABLE>
(10) RELATED PARTY TRANSACTIONS
The Company engaged the services of an advertising/marketing agency
previously owned by a shareholder's spouse. During 1993, services
provided by this advertising/marketing agency approximated $159,000.
(11) PROFIT SHARING PLAN
The Company has a profit sharing plan that covers substantially all of its
employees after minimum service requirements have been met.
The Plan provides for elective employee salary reductions of 1% to 15% of
gross wages. The Company matches 50% of the employee's salary reduction
from 1% to 7% of base pay only. Contributions of approximately $63,000
and $54,000 were made in 1994 and 1993, respectively. Employer
contributions vest at 20% per year of service, commencing after three
years of service and are fully vested after seven years of service.
The Company may also elect to make a discretionary contribution. No such
election was made for 1994 or 1993.
(12) SUBSEQUENT EVENT
On October 27, 1994, the Company signed a letter of intent to be acquired
by X-Rite, Incorporated for $11,500,000 in cash for all outstanding
shares of common stock and the retirement of all outstanding options.
Approximately $1,150,000 will be held in escrow for a period of six months
as security for future contingencies or breaches of representations and
warranties.
(b) Pro Forma Condensed Consolidated Financial Information.
The following pro forma condensed consolidated balance sheet as of December 31,
1994, and the pro forma condensed consolidated statement of income for the
year ended December 31, 1994, give effect to the acquisition of 100% of the
outstanding shares of Labsphere, Inc. ("Labsphere") by X-Rite, Incorporated
(the "Company"). The pro forma information is based on the historical
financial statements of Labsphere, Inc. and X-Rite, Incorporated, giving
effect to the transaction under the purchase method of accounting and the
assumptions and adjustments in the accompanying notes to the pro forma
condensed consolidated financial information.
The pro forma condensed consolidated financial information has been prepared
by the Company's management based upon the financial statements of Labsphere
included elsewhere herein. This pro forma information may not be indicative
of the results that actually would have occurred if the combination had been
in effect on the dates indicated or which may be obtained in the future. The
pro forma information should be read in conjunction with the audited
financial statements and notes thereto of Labsphere, Inc. contained elsewhere
herein and the consolidated financial statements and notes thereto of X-Rite,
Incorporated included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
<TABLE>
<CAPTION>
Pro Forma Condensed Consolidated Balance Sheets
As of December 31, 1994
(Unaudited)
Historical
X-Rite, Labsphere Pro Forma Pro Forma
ASSETS Incorporated Inc. Adjustments Consolidated
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and short-term
investments 14,933,000 5,000 (13,200,000) (A) 1,738,000
Accounts receivable 10,211,000 1,868,000 - 12,079,000
Inventories 12,858,000 984,000 - 13,842,000
Prepaids and other 1,419,000 127,000 - 1,546,000
39,421,000 2,984,000 (13,200,000) 29,205,000
PLANT AND EQUIPMENT,
net 11,701,000 2,136,000 200,000 (B) 14,037,000
GOODWILL 9,225,000 (C) 9,225,000
OTHER ASSETS 3,436,000 136,000 500,000 (B) 4,072,000
$ 54,558,000 $5,256,000 $(3,275,000) $56,539,000
LIABILITIES AND
SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Note payable $ - $ 325,000 - 325,000
Current portion of
long-term debt - 243,000 (89,000) (A) 154,000
Accounts payable 1,419,000 642,000 - 2,061,000
Accrued liabilities 1,429,000 234,000 - 1,663,000
2,848,000 1,444,000 (89,000) 4,203,000
LONG-TERM DEBT, net
of current portion - 1,818,000 (1,251,000) (A) 567,000
LONG-TERM DEBT TO
SHAREHOLDERS - 360,000 (360,000) (A) -
DEFERRED TAXES 578,000 59,000 - 637,000
SHAREHOLDERS'
INVESTMENT 51,132,000 1,575,000 (1,575,000) (B) 51,132,000
$ 54,558,000 $ 5,256,000 $(3,275,000) $ 56,539,000
See accompanying note to unaudited pro forma condensed consolidated financial
information.
</TABLE>
<TABLE>
<CAPTION> Pro Forma Condensed Consolidated Statements of Income
For the Year Ended December 31, 1994
(Unaudited)
Historical
X-Rite, Labsphere, Pro Forma Pro Forma
Incorporated Inc. Adjustments Consolidated
<S> <C> <C> <C> <C>
NET SALES 59,475,000 6,944,000 - 66,419,000
COST OF SALES 18,000,000 2,761,000 - 20,761,000
SELLING, GENERAL
AND ADMINISTRATIVE 23,677,000 3,459,000 655,000 (C) 27,791,000
Operating income 17,798,000 724,000 (655,000) 17,867,000
INTEREST (INCOME)
EXPENSE (590,000) 254,000 333,000 (D) (3,000)
Income before
income taxes 18,388,000 470,000 (988,000) 17,870,000
PROVISION FOR INCOME
TAXES 5,742,000 193,000 (3,000) (E) 5,932,000
Net income $12,646,000 $277,000 $(985,000) $11,938,000
Net income per share $0.60 $0.57
Weighted average
shares outstanding 21,078,054 21,078,054
See accompanying note to unaudited pro forma condensed consolidated financial
information.
</TABLE>
Note to Pro Forma Condensed Consolidated Financial Information
Note 1 - Pro Forma Adjustments
The following adjustments have been made to reflect the pro forma effect of the
Company's acquisition of Labsphere as if the acquisition was consummated as
of December 31, 1994 (pro forma condensed consolidated balance sheet) and
January 1, 1994 (pro forma condensed consolidated statements of income):
(A) Reflects payment by the Company of $11,500,000 to purchase 100% of the
outstanding shares of Labsphere Common Stock from the stockholders, and
decrease Labsphere's outstanding indebtedness by $1,700,000.
(B) Under purchase accounting, Labsphere's assets and liabilities are required
to be adjusted to their estimated fair values. The estimated fair value
adjustments are based upon management's estimates and available
information in Labsphere's financial statements included elsewhere
herein. These values are subject to potential future adjustments for a
period of twelve months subsequent to the acquisition date and will be
adjusted based upon the results of an independent appraisal to be
performed during that time frame. The adjustment made reflects
the increase from book value to estimated fair value for Labsphere's land,
building and certain patents.
(C) After adjusting all assets and liabilities to their estimated fair values,
the remainder of the purchase price not allocated to other categories
becomes goodwill, as presented here. It is anticipated that the period
over which the Company will recognize the cost of this purchase price in
excess of the fair market value of net assets is fifteen years.
(D) Due to the reduction of both indebtedness and investments (see Note (A)
above), the related interest expense and income, respectively, would be
substantially reduced.
(E) The goodwill amortization is not deductible for federal tax purposes and
the interest income that was reduced based on a lower investment level
was tax exempt. The combination of these factors is reflected here.
Profitability improvements expected to result from integrating the operations of
Labsphere with X-Rite have not been reflected in the pro forma data herein.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
X-RITE, INCORPORATED
Dated: May 5, 1995 By: /s/ Duane Kluting
Duane Kluting
Its Chief Financial Officer
