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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (date of earliest event reported): January 21, 1998
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X-RITE, INCORPORATED
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(Exact name of registrant as specified in its charter)
Michigan
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(State or other jurisdiction of incorporation)
0-14800 38-1737300
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(Commission File Number) (IRS Employer Identification No.)
3100 44th Street, SW, Grandville, Michigan 49418
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(Address and zip code of principal executive offices)
(616) 534-7663
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(Registrant's telephone number, including area code)
Exhibit Index at page 4.
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Item 5. Other Events
Attached hereto as Exhibit A, and incorporated herein by this
reference is a press release from the issuer dated January 21, 1998.
A detailed year-by-year projection for the projected 20-year life of
the redemption agreements, as referred to in the aforementioned press
release, is attached hereto as Exhibit B, and incorporated herein by this
reference.
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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.
X-RITE, INCORPORATED
Dated: January 21, 1998 By /s/ Duane F. Kluting
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Duane F. Kluting
Its Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description Page No.
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A Press Release 5
B Twenty-Year Projected Impact of Redemption 9
Program
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Exhibit A
PRESS RELEASE
X-Rite, Incorporated - World Headquarters
3100 44th Street, S.W., Grandville, Michigan 49418 USA
(616) 534-7663 FAX (616) 534-9212
CONTACT: Duane Kluting
X-Rite, Incorporated
(616) 534-7663
FOR IMMEDIATE RELEASE
X-RITE, INCORPORATED ANNOUNCES
FOUNDERS' STOCK REPURCHASE AGREEMENTS
GRANDVILLE, Michigan, January 21, 1998 -- X-Rite, Incorporated
(NASDAQ/NMS:XRIT) today announced details of a uniquely structured stock
repurchase transaction. In an effort to preserve and enhance the value of
X-Rite stock, the Company and its founding stockholders have entered into
agreements that cover the future repurchase of 4.54 million shares or 21.5
percent of the Company's outstanding stock.
These agreements represent the culmination of months of work by a
non-founder subcommittee of the Board of Directors. The stock purchases
will occur following the later of the death of each founder and his spouse.
The cost of the repurchase agreements will be funded by proceeds from life
insurance policies the Company has purchased on the lives of certain of
these individuals. The price the Company will pay the founders' estates
for these shares will reflect a 10 percent discount from the market price,
although the discounted price may not be less than $10 per share or more
than $25 per share.
Seeking advise from investment bankers, as well as legal, tax,
insurance, and accounting professionals, the subcommittee of the Board
developed a unique program that combines life insurance and stock purchase
agreements. The repurchase agreements reduce the risk of a founder's
estate needing to sell a large block of shares on the open market in order
to pay estate taxes. The financial impact of this program will be
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Contact: Duane Kluting
X-Rite, Incorporated
Page 2 e-mail: [email protected]
recognized over many years and is expected to be positive for the Company
and the non-founder stockholders. The exact benefit to the Company is not
known at this time since the financial outcome from paying insurance
premiums, recognizing changes in cash surrender values, receiving insurance
proceeds, and repurchasing shares of stock will be determined by the timing
of future events. A summary of the pro forma impact of this transaction is
shown on the following pages.
"We are very pleased to have reached agreements with the founders for
the future repurchase of such a significant amount of their collective
holdings," said Duane Kluting, vice president and chief financial officer.
"The intent of the purchase of these shares is to avoid the depressing
impact that the sale of large blocks of stock would likely have on the
market price of our stock. In addition, we expect the future retirement of
these shares will create substantial reverse dilution which should have a
very positive effect on the market price of our stock," he concluded.
X-Rite, Incorporated (NASDAQ/NMS:XRIT) is a leading provider of
advanced technologies for quality control instruments for companies in the
paint, plastic, textile, packaging, photographic, graphic arts, and medical
industries. The Company has two main product lines: instruments that
measure color and appearance, and instruments that measure optical or
photographic density. Its wholly-owned subsidiary, Labsphere, is a leading
supplier of integrating spheres, sphere systems and reflectance coatings.
X-Rite is headquartered in Grandville with offices in New Hampshire,
Massachusetts, California, Germany, England, Hong Kong, and the Czech
Republic.
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Contact: Duane Kluting
X-Rite, Incorporated
Page 3 e-mail: [email protected]
THE FOLLOWING TABLE SUMMARIZES PRO FORMA FINANCIAL DATA RESULTING
FROM THE INSURANCE FUNDED STOCK REPURCHASE AGREEMENTS
The information shown is for 1998, and the total impact over the projected
20 year life of the agreements. A detailed year by year projection is
available in Form 8-K as filed by the Company with the Securities and
Exchange Commission, or by writing the Company or via the Company's web
page (www.x-rite.com)
20 Year
($000 except per share data) 1998 Total
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Insurance premiums $4,327 $ 79,029
Change in cash surrender values 3,126 -
Insurance (expense) income (1,201) 11,610
Insurance proceeds - 160,000
After-tax interest on borrowings - 29,541
Cost of stock repurchased $ - $113,500
Pro forma earnings per share (EPS):
Effect of insurance on EPS $(0.06) $ 9.97 (1)
Effect of interest expense on EPS - (1.59) (2)
Reverse dilution effect on EPS - 7.74 (3)
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Total pro forma EPS $(0.06) $16.12
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The earnings per share information shown above consists of three elements:
(1) net cost of insurance and the proceeds of insurance policies,
(2) compound interest on borrowings assumed to be required to purchase
shares for which insurance proceeds are not immediately available, and
(3) the reverse dilution effect that fewer shares outstanding will have on
future earnings
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The above information constitutes forward-looking statements, and actual
results could differ materially as a result of numerous important factors,
including the following:
* The receipt of insurance proceeds is assumed to coincide with the
actuarial life expectancies of the insured individuals, and those
deaths may occur sooner or later than predicted.
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Contact: Duane Kluting
X-Rite, Incorporated
Page 4 e-mail: [email protected]
* The interest expense portrayed is based on the assumption that certain
redemptions will occur before insurance proceeds are available, based on
actuarial life expectancies, in as much as not all of the selling
shareholders are insurable. Interest is compounded at 7 percent and tax
effected at 35 percent. All deaths may not occur at the actuarially
predicted times, interest rates may vary from 7 percent, and tax rates
may differ from 35 percent.
* Stock purchases have been calculated at the maximum price of $25 per
share or $113,500,000 in the aggregate, and insurance has been purchased
at the $160,000,000 level to cover both the maximum purchase price and
anticipated borrowing costs. Shares may be purchased at less than $25
per share and borrowing costs may vary for the reasons described in the
preceding note.
* Earnings of the Company (exclusive of the effect of the insurance
premiums, insurance proceeds, and net interest expense) have been
assumed to increase at a compound rate of 10 percent annually. The
Company has achieved a growth rate of slightly more than 29 percent for
the 12-year period since the Company made its initial public offering,
but it is doubtful that growth at comparable rates can be achieved into
the future.
* The reverse dilution effect on earnings per share has been calculated
based upon stock purchases timed in accordance with the actuarial life
expectancies of the selling shareholders. The results portrayed will
vary significantly to the extent that deaths occur at times
significantly different from the actuarial predictions.
* The market price for the Company's shares can be impacted by factors not
within the control of the Company, such as an extended period of
deflation or recession. Any purchase necessitated at a time when the
market price for the shares is below $10 would result in a dilutive
effect on earnings per share, corresponding to the number of shares at
market price represented by the aggregate excess of the $10 price over
market price for the shares.
* Stock purchases have been assumed to occur at the beginning of each
year, and no effect has been given to other potential changes in the
Company's outstanding shares that are unrelated to the redemption
program, such as stock option exercises, stock dividends, stock splits,
etc.
* * *
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<PAGE> 9 Exhibit B
<TABLE>
X-Rite, Incorporated
Insurance-Based Stock Repurchase Program
Calculation of Impact on Earnings Per Share
($ in thousands except per share data)
<CAPTION>
Earnings Per Share
After-Tax Adjusted ---------------------------------------
Increase Insurance Interest Shares Shares Insurance Interest Reverse
Insurance in Cash (Expense) Insurance Cost of (Expense) Purchased Outstanding (Expense) (Expense) Dilution Total
Year Premiums Value Income Proceeds Stock Income (Millions) (Millions) Income Income Effect Pro-Forma
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 $ 4,327 $3,126 $(1,201) 21.15 $(0.06) - - $(0.06)
1999 4,327 3,540 (788) 21.15 (0.04) - - (0.04)
2000 4,327 3,696 (631) 21.15 (0.03) - - (0.03)
2001 4,327 4,134 (193) 21.15 (0.01) - - (0.01)
2002 4,327 4,275 (51) 21.15 0.00 - - 0.00
2003 4,327 4,423 96 21.15 0.01 - - 0.01
2004 4,327 4,981 654 21.15 0.03 - - 0.03
2005 4,327 5,161 835 $ 28,000 $(1,274) 1.12 20.03 0.04 $(0.06) $0.10 0.08
2006 4,327 5,328 1,000 25,000 (2,469) 1.00 19.03 0.05 (0.13) 0.23 0.15
2007 4,327 5,452 1,125 (2,582) 19.03 0.06 (0.14) 0.25 0.17
2008 4,327 6,061 1,734 (2,699) 19.03 0.09 (0.14) 0.28 0.23
2009 4,327 6,188 1,861 (2,822) 19.03 0.10 (0.15) 0.31 0.26
2010 4,327 6,176 1,849 (2,951) 19.03 0.10 (0.16) 0.34 0.28
2011 4,327 6,076 1,749 (3,085) 19.03 0.09 (0.16) 0.37 0.30
2012 4,327 5,793 1,466 (3,225) 19.03 0.08 (0.17) 0.41 0.32
2013 4,327 5,238 911 $ 35,000 27,500 (3,031) 1.10 17.93 2.00 (0.17) 0.72 2.55
2014 3,237 3,768 531 (3,169) 17.93 0.03 (0.18) 0.79 0.64
2015 3,237 3,523 286 30,000 (1,948) 17.93 1.69 (0.11) 0.87 2.45
2016 2,375 2,589 214 55,000 32,750 (1,024) 1.31 16.62 3.32 (0.06) 1.46 4.72
2017 948 $1,111 163 40,000 250 738 0.01 16.61 2.42 0.04 1.61 4.07
------- ------- -------- -------- -------- ---- ------ ------ ----- ------
$79,029 $11,610 $160,000 $113,500 $(29,541) 4.54 $ 9.97 $(1.59) $7.74 $16.12
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<FN>
The above information constitutes forward-looking statements, and actual results could differ materially as a result of
numerous important factors, including those mentioned in the press release included in this Form 8-K as Exhibit A.
</FN>
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