SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 1995
Or
( ) Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from ________________
to____________________________.
Commission file number 0-14800
X-RITE, INCORPORATED
(Exact name of registrant as specified in its charter)
Michigan 38-1737300
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
3100 44th St., SW
Grandville, Michigan 49418
(Address of principal executive offices) (Zip Code)
616-534-7663
(Registrant's telephone number, including area code.)
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 [ ]
The number of shares outstanding of registrant's common stock, par value
$0.10 per share, at August 9, 1995 was 21,002,455 shares.
<PAGE>
EXHIBIT INDEX is on page 10
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
X-RITE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS June 30, December 31,
1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,960,000 $ 1,171,000
Short-term investments - 13,762,000
Accounts receivable, less allowances
of 379,000 in 1995 and 251,000
in 1994 13,051,000 10,211,000
Inventories 13,239,000 12,858,000
Deferred tax assets 557,000 557,000
Prepaids and other 2,045,000 862,000
31,852,000 39,421,000
PROPERTY, PLANT AND EQUIPMENT, at cost 23,527,000 18,254,000
Less - Accumulated depreciation (8,811,000) (6,553,000)
14,716,000 11,701,000
OTHER ASSETS 13,204,000 3,436,000
$ 59,772,000 $ 54,558,000
</TABLE>
(See accompanying notes to the consolidated condensed financial statements.)
<PAGE>
<TABLE>
<CAPTION>
X-RITE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND June 30, December 31,
SHAREHOLDERS' EQUITY 1995 1994
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 1,204,000 $ 1,419,000
Accrued liabilities 1,759,000 1,429,000
2,963,000 2,848,000
DEFERRED INCOME TAXES 637,000 578,000
SHAREHOLDERS' EQUITY:
Preferred stock, $.10 par value,
5,000,000 shares authorized; none
issued. - -
Common stock, $.10 par value, 25,000,000
authorized; 21,002,455 and 20,992,783
shares issued and outstanding
respectively. 2,100,000 2,099,000
Additional paid-capital 6,215,000 6,075,000
Retained earnings 47,817,000 43,010,000
Cumulative translation adjustment 40,000 (52,000)
56,172,000 51,132,000
$ 59,772,000 $ 54,558,000
</TABLE>
(See accompanying notes to the consolidated condensed financial statements.)
<PAGE>
<TABLE>
<CAPTION>
X-RITE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET SALES $18,906,000 $14,758,000 $36,852,000 $27,111,000
COSTS AND EXPENSES:
Cost of sales 6,523,000 4,371,000 11,954,000 8,223,000
Selling, general and
administrative 7,471,000 4,870,000 14,131,000 8,900,000
Research and
development 1,196,000 795,000 2,248,000 1,515,000
Other (income) (67,000) (121,000) (157,000) (248,000)
15,123,000 9,914,000 28,176,000 18,389,000
Income before
provision for
income taxes 3,783,000 4,844,000 8,676,000 8,722,000
PROVISION FOR INCOME TAXES 1,230,000 1,585,000 2,820,000 2,885,000
NET INCOME $ 2,553,000 $ 3,259,000 $ 5,856,000 $ 5,837,000
WEIGHTED AVERAGE NUMBER
OF
SHARES OUTSTANDING
AND COMMON STOCK
EQUIVALENTS 21,178,000 21,050,000 21,164,000 21,049,000
EARNINGS PER SHARE
$ .12 $ .15 $ .28 $ .28
CASH DIVIDENDS PER SHARE $ .025 $ .02 $ .05 $ .04
</TABLE>
(See accompanying notes to the consolidated condensed financial statements.)
<PAGE>
<TABLE>
<CAPTION>
X-RITE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities $ 2,333,000 $ 4,160,000
Cash flows from investing activities:
Acquisition of Labsphere, Inc. (11,500,000) -
Short term investments 13,762,000 (2,539,000)
Capital expenditures (1,876,000) (1,439,000)
386,000 (3,978,000)
Cash flows from financing activities:
Dividends paid (1,050,000) (838,000)
Issuance of common stock under
Employee Benefit Plans 141,000 136,000
(909,000) (702,000)
Effect of exchange rate changes on
cash and cash equivalents (21,000) (8,000)
Net increase (decrease) in cash and cash
equivalents 1,789,000 (528,000)
Cash and cash equivalents, beginning of period 1,171,000 2,544,000
Cash and cash equivalents, end of period $ 2,960,000 $ 2,016,000
</TABLE>
(See accompanying notes to the consolidated condensed financial statements.)
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) GENERAL INFORMATION
The consolidated condensed financial statements included herein have been
prepared by the Registrant, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. 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. Although the
Registrant believes that the disclosures are adequate to make information
presented not misleading, it is suggested that these consolidated condensed
financial statements be read in conjunction with the consolidated financial
statements and notes thereto included in the Registrant's 1994 Annual
Report on Form 10-K.
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting of only
a normal and recurring nature, necessary to present fairly the financial
position of the Registrant as of June 30, 1995 and December 31, 1994, and
the results of operations and cash flows for the six months ended
June 30, 1995 and 1994.
(2) INVENTORIES
Inventories consisted of the following:
<TABLE>
June 30, December 31,
1995 1994
<S> <C> <C>
Raw materials $ 3,442,000 $ 3,294,000
Work in process 5,163,000 5,044,000
Finished goods 4,634,000 4,520,000
$ 13,239,000 $ 12,858,000
</TABLE>
<PAGE>
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Net sales of $18,906,000 for the three months ended June 30, 1995 increased
28 percent over sales of $14,758,000 for the same period in 1994. For the
six months ended June 30, 1995, net sales of $36,852,000 increased 35.9
percent compared with $27,111,000 for the same period last year. Increased
sales are attributed to increased unit volume rather than price increases.
Gross margin, as a percent of net sales, for the quarter and six months ended
June 30, 1995, was 65.5 and 67.8 percent compared with 70.4 and 69.7 percent
for the same period in 1994. Product mix, as well as the inclusion of the
newly acquired Labsphere subsidiary volume, at lower margins, accounted for
this decrease.
Comparative consolidated total selling, research and development, and general
and administrative expenses, as a percentage of sales, are as follows:
<TABLE>
Total % of
Expenses Sales
<S> <C> <C>
Quarter ended June 30, 1995 $ 8,667,000 45.8%
Quarter ended June 30, 1994 $ 5,665,000 38.4%
Six months ended June 30, 1995 $16,379,000 44.5%
Six months ended June 30, 1994 $10,415,000 38.4%
</TABLE>
Actual expenses for the quarter and six months ended June 30, 1995, increased
$3,002,000 and $5,964,000, respectively, when compared with the same periods
of last year. These increases are a result of additional staffing and
promotional costs associated with new product introductions, as well as
increased research and product development activities. Management continually
reviews these expenditures to ensure they are in keeping with strategic
objectives.
Other income, which is interest income from short-term investments, decreased
44.6 percent for the quarter and 36.7 percent for the six months ended
June 30, 1995, due to a reduction in funds available for investment.
Net income of $2,553,000 decreased 21.7 percent for the three months ended
June 30, 1995, compared to $3,259,000 for same quarter of 1994. For the six
months, net income of $5,856,000 increased .3 percent over net income of
$5,837,000 for the same period of 1994. Net income, for the second quarter
1995, decreased as a result of deferred purchases by a few customers, as
well as increased spending on research and development and marketing
programs. Net income for the first six months of 1995 was essentially
unchanged from the 1994 level.
<TABLE>
Comparative earnings per share are as follows:
Average Shares &
Earnings Stock Equivalents
Per Share Outstanding
<S> <C> <C>
Quarter ended June 30, 1995 $.12 21,178,000
Quarter ended June 30, 1994 .15 21,050,000
Six months ended June 30, 1995 .28 21,164,000
Six months ended June 30, 1994 .28 21,049,000
</TABLE>
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
Working capital at June 30, 1995, was $28,889,000 compared with $36,573,000
at December 31, 1994. This reduction is the net of increased levels of
accounts receivable and inventory to support higher volume offset by a
reduction in short-term investments which were used for the acquisition
of Labsphere, Inc.
The Company expects to spend approximately $6,000,000 for fixed assets in
1995. Approximately $1,876,000 has been spent for the six months ended
June 30, 1995. Capital expenditures are expected to be funded from
operations and working capital.
The Company has available a $20,000,000 line of credit with a local bank,
providing for borrowings with interest at 1.5 percent above the "Effective
Federal Funds Rate." The borrowings are unsecured and no compensating
balances are required by the agreement. There were no borrowings under
this agreement in the six months ended June 30, 1995.
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting on May 15, 1995. The following directors
were elected to a three year term expiring in 1998;
<TABLE>
For Withheld Broker Non-Vote
<S> <C> <C> <C>
Ted Thompson 17,134,062 43,025 -0-
Ronald A. Vandenberg 17,134,062 43,025 -0-
Quinten E. Ward 17,134,062 43,025 -0-
</TABLE>
Directors whose terms expire in 1997 are Lawrence E. Fleming, Rufus S. Teesdale
and Charles Van Namen.
<PAGE>
Directors whose terms expire in 1996 are Leonard C. Blanding, Dr. Marvin G.
DeVries and Glenn M. Walters.
Results of the proposal to approve the 1994 Employee Stock Purchase Plan:
<TABLE>
<S> <C>
Favorable Votes 16,954,684
Unfavorale Votes 97,785
Abstentions 124,618
Broker Non-Vote -0-
</TABLE>
Results of the propsal to approve the Amendment to the Articles of
Incorporation:
<TABLE>
<S> <C>
Favorable Votes 16,997,718
Unfavorable Votes 52,213
Abstentions 127,126
Broker Non-Vote -0-
</TABLE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index on Page 10.
(b) No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 1995.
<PAGE>
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.
X-RITE, INCORPORATED
Date: August 4, 1995 By: /s/ Ted Thompson
Ted Thompson
Chairman - Chief Executive Officer
Date: August 4, 1995 By: /s/ Duane Kluting
Duane Kluting
Vice President - Chief Financial Officer
<PAGE>
EXHIBITS
Exhibit No. Description Page
3(a) Registrant's Restated Articles of Incorporation were filed
as Exhibit 3(a) to a Registration Statement on Form S-18
(Registration No. 33-3954C) which became effective
April 10, 1986, and a Certificate of Amendment was
filed as Exhibit 3(a)(1) to a report on Form 10-Q filed in
August of 1987, both of which are hereby incorporated
by reference.
3(b) Registrant's Amended and Restated By-laws were
filed as Exhibit 3(b) on Form 10K filed by Registrant in
March of 1995 and the same is hereby incorporated herein
by reference.
4 A specimen form of stock certificate for the Registrant's
common stock par value $.10 per share was filed as
Exhibit No. 4 to a report on Form 10-Q filed by the
Registrant in August of 1986 and the same is hereby
incorporated herein by reference.
10(a)(1) An Indemnification Contract between Registrant and Director
Ted Thompson, was filed as Exhibit 10(a)(1) to a report on
Form 10-Q filed in August of 1987, and the same is hereby
incorporated herein by reference.
10(a)(2) An Indemnification Contract between Registrant and
Director Marvin G. DeVries, was filed as Exhibit 10(a)(2)
to a report on Form 10-Q filed in August of 1987, and
the same is hereby incorporated herein by reference.
10(a)(3) An Indemnification Contract between Registrant and
Director Charles VanNamen, was filed as Exhibit 10(a)(3)
to a report on Form 10-Q filed in August of 1987, and the
same is hereby incorporated herein by reference.
10(a)(4) An Indemnification Contract between Registrant and Director
Quinten E. Ward, was filed as Exhibit 10(a)(4) to a report
on Form 10-Q filed in August of 1987, and the same hereby
incorporated herein by reference.
10(a)(5) An Indemnification Contract between Registrant and Director
Glenn M. Walters, was filed as Exhibit 10(a)(5) to a report
on Form 10-Q filed in August of 1987, and the same is hereby
incorporated herein by reference.
<PAGE>
Exhibit No. Description Page
10(a)(6) An Indemnification Contract between Registrant and
Director Rufus S. Teesdale, was filed as Exhibit 10(a)(6)
to a report on Form 10-Q filed in August of 1987, and the
same is hereby incorporated herein by reference.
10(a)(7) An Indemnification Contract between Registrant and
Director Lawrence E. Fleming, was filed as Exhibit 10(a)(7)
to a report on Form 10-Q filed in August of 1987, and the
same is hereby incorporated herein by reference.
10(a)(8) An Indemnification Contract between Registrant and
Director Leonard C. Blanding, was filed as Exhibit 10(a)(8)
to a report on Form 10-Q filed in August of 1987, and the
same is hereby incorporated herein by reference.
10(a)(9) An Indemnification Contract between Registrant and
Director Ronald A. VandenBerg, was filed as Exhibit 10(a)(9)
to a report on Form 10-K filed in March of 1990, and the
same is hereby incorporated herein by reference.
10(b) Registrant's 1993 Outside Director Stock Option Plan was
filed as Exhibit No. 99 to a Registration Statement on
Form S-8 in July of 1994, and the same is hereby
incorporated herein by reference.
10(c) Registrant's 1993 Employee Stock Option Plan was filed
as Exhibit No. 99 to a Registration Statement on Form
S-8 in July of 1994, and the same is hereby
incorporated herein by reference.
10(d) Exchange Agreement between the Registrant and
Ronald L. Sisson for the exchange of certain real estate
was filed as Exhibit 10(d) on Form 10K filed by Registrant
in March of 1995 and the same is hereby incorporated by
Reference.
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