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SECURITIES & EXCHANGE COMMISSION
WASHINGTON D.C. 20549
Form 10-K
(Mark one)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Act of
1934 (Fee required) for the fiscal year ended December 31, 1995, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required) for the transition period from
_______________to _________________
Commission file number 0-14800
X-RITE, INCORPORATED
- --------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Michigan 38-1737300
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
3100 44th Street, SW, Grandville, MI 49418
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (616) 534-7663
--------------
Securities registered pursuant to Section 12(b) of the Act: (none)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 per share
----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 1, 1996, 21,015,706 shares of the registrant's common stock,
par value $.10 per share, were outstanding. The aggregate market value of
the common stock held by non-affiliates of the registrant (i.e., excluding
shares held by executive officers, directors and control persons as defined
in Rule 405, 17 CFR 230.405) on that date was $184,380,304, computed at the
closing price on that date.
Portions of the Company's Proxy Statement for the 1996 Annual Meeting of
Shareholders are incorporated by reference into Part III. Exhibit Index is
located at Page 31.
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PART I
ITEM 1. BUSINESS
(a) General Development of Business
- ------------------------------------
X-Rite, Incorporated ("X-Rite" or the "Company") was organized as a
Michigan corporation in 1958. The business currently conducted by the
Company is largely an outgrowth of the Company's x-ray marking and
identification system introduced in 1961. The Company's silver recovery
equipment, introduced in 1968, and its first quality control instruments,
introduced in 1975, were developed to meet the needs of film processors; a
customer class known to the Company from its sales of radio-opaque x-ray
marking tape.
The Company has expanded its product offerings by concentrating on its
instrument technologies and developing expertise in the fields of light and
color measurement. Pursuant to that strategy, X-Rite has successfully
developed and marketed numerous quality control instruments and
accessories.
The Company made its initial public offering of common stock during 1986.
Proceeds from that public offering were used to finance the construction of
a new building for office, manufacturing and warehouse needs, purchase new
production and laboratory equipment, retire debt and provide working
capital.
X-Rite has grown through internal expansion and through acquisitions. In
1993 the Company established two foreign sales and service subsidiaries;
X-Rite GmbH, Cologne, Germany and X-Rite Asia-Pacific Limited, Hong Kong.
In 1994 the Company purchased a foreign sales and service subsidiary,
X-Rite Limited, Congleton, Cheshire, England, and acquired certain assets
of Colorgen, Inc. ("Colorgen"), a Massachusetts-based manufacturer of
retail point-of-purchase paint matching systems. In 1995 the Company
acquired all of the outstanding stock of Labsphere, Inc. ("Labsphere") of
North Sutton, New Hampshire. Labsphere was founded in 1981 and is a
leading manufacturer of light measurement and light source integrating
systems and instrumentation.
(b) Financial Information About Industry Segments
- --------------------------------------------------
For purposes of the consolidated financial statements included as part of
this report, all operations of the Company are classified in one industry
segment: quality control instruments and accessories.
(c) Narrative Description of Business
- --------------------------------------
Principal Products
The Company primarily manufactures and sells proprietary quality control
instruments which utilize advanced electronics and optics technologies.
The principal types of products produced include:
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Densitometers
X-Rite's first densitometer was introduced in 1975. A densitometer is an
instrument that measures optical or photographic density, compares that
measurement to a reference standard, and signals the result to the operator
of the instrument. There are two types of densitometers; transmission
densitometer and reflection densitometer.
A transmission densitometer measures the amount of light that is
transmitted through film. Some models are designed for use in controlling
variables in the processing of x-ray film in medical and non-destructive
testing applications. Other models are designed to be used to control
process variables in the production of photo-transparencies, such as
photographic film and microfilm. Reflection densitometers measure the
amount of incident light that is reflected from a surface, such as ink on
paper.
X-Rite introduced its spectrodensitometer in 1990 which combines the
function of a densitometer with the functions of a colorimeter and a
spectrophotometer (see following paragraphs) to provide measurements for
monitoring and controlling color reproduction. Also introduced in 1990 was
the scanning densitometer, which is used for controlling the color of
printed inks in graphic arts applications.
In 1994 the Company began delivering densitometer-based products for
digital imaging applications. Products which calibrate image setters,
raster image processors and digital printers were the initial entrants into
the market for use in desktop publishing and computer-based printing
activities.
Sensitometers
Sensitometers have been manufactured by X-Rite since 1975. This instrument
is used to expose various types of photographic film in a very precise
manner for comparison to a reference standard. The exposed film is
processed and then "read" with a densitometer to determine the extent of
variation from the standard.
Colorimeters
In 1989 the Company introduced its first colorimeter. Colorimeters measure
light much like the human eye using red, green and blue receptors and are
used to measure printed colors on packages, labels, textiles and other
materials where a product's appearance is critical for buyer acceptance.
In 1990 X-Rite added the spectrocolorimeter which is a combination
instrument that performs colorimeter functions by applying
spectrophotometric techniques and principles (see next paragraph), thereby
greatly improving the accuracy and reliability of the instrument.
Spectrophotometers and Accessories
The spectrophotometer, introduced in 1990, is related to the colorimeter;
however, it measures light at many points over the entire visible spectrum,
generally with the high degree of accuracy required in laboratory
measurements. Spectrophotometers are used in color formulation for
materials such as plastics, paints, inks, ceramics and metals.
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In 1991 the Company introduced a multi-angle spectrophotometer which is
used to measure the color of metallic finishes. This instrument is useful
for controlling the color consistency of automotive paints and other
metallic and pearlescent coatings. In 1992 the Company introduced a
spherical spectrophotometer which measures the color of textured surfaces
and is used in the textile, paint and plastics industries.
During 1993 and 1994, X-Rite introduced a group of color formulation and
quality control software packages designed for use with its
spectrophotometer products. This software is sold separately or is
combined with a computer and an instrument and sold as a turn-key system.
Marketing efforts with respect to this family of related products are being
directed at packaging material printers, textile, plastic, paint, ink and
coatings manufacturers.
In 1994 and 1995, X-Rite introduced products developed for desktop graphics
professionals. One of the instruments in this product category is a hand-
held spectrophotometer which captures color from almost any item and sends
it to a personal computer. Once there, the color can be used in a variety
of graphic design applications, previewed and prepared for output, and
organized into a custom electronic color library; colors can also be
transmitted to other personal computers anywhere in the world using
X-Rite's ColorMail software.
Another 1995 introduction was the auto-tracking spectrophotometer. This
instrument is used in the graphic arts industry to help control hard to
match colors such as pastels, reflex blue, dark reds and colors used in
corporate logo standards.
The 1995 acquisition of Labsphere expanded the Company's product lines to
include standard accessories which are compatible with a majority of
commercially available spectrophotometers worldwide. These accessories
extend a spectrophotometer's capabilities and enhance its performance.
Point-of-Purchase Paint Matching Systems
In 1993 the Company introduced computerized point-of-purchase paint
matching systems for use by paint stores, hardware stores, mass merchants
and home improvement centers. After successfully establishing its own line
of products, the Company acquired certain assets of Colorgen in 1994.
Colorgen had a significant share of the U.S. point-of-purchase paint
matching market. With that acquisition, X-Rite has established itself as a
market leader in the retail point-of-purchase architectural paint matching
business.
Integrating Spheres and Integrating Sphere Systems
With the acquisition of Labsphere, X-Rite added integrating spheres and
integrating sphere systems to its product lines. Applications for these
instruments include testing incandescent and fluorescent lamp output,
calibration of remote sensors, laser power measurement, and reflectance and
transmittance light measurement.
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Reflectance Materials and Coatings
Labsphere is also an OEM supplier of proprietary reflectance materials and
coating services. These materials and services are used in such products as
photographic processing equipment, check scanning systems, x-ray film
analysis, backlight illuminators and surface profiling equipment.
Other Products
For many years, X-Rite has also manufactured silver recovery equipment,
heat shrink packaging equipment, and radio-opaque marking tape.
Collectively, these other products represent less than five percent of the
Company's consolidated net sales.
X-Rite categorizes the sales of its products into six major categories;
medical, photographic, graphic arts, digital imaging, and color and
appearance.
Sales of the Company's products are made by its own sales personnel and
through independent manufacturer's representatives. Certain products not
sold directly to end users are distributed in the U.S. through a network of
fifteen hundred independent dealers and outside the U.S. through four
hundred independent dealers in fifty countries. Independent dealers are
managed and serviced by the Company's sales staff and by independent sales
representatives.
Raw Materials
Raw materials and components necessary for manufacturing products and
providing services are generally available from several sources. The
Company does not foresee any unavailability of materials or components
which would have a material adverse effect on its overall business in the
near term.
Patents and Trademarks
The Company owns nineteen U.S. patents which are significant for products
which it currently manufactures; sixteen relating to light and color
measuring instruments, one relating to silver recovery equipment, one
relating to shrink packaging equipment, and one for reflectance materials
and coatings.
The Company currently has nine patent applications on file in the U.S. and
in several other countries. While the Company follows a policy of
obtaining patent protection for its products, it does not believe that the
loss of any existing patent, or failure to obtain any new patents, would
have a material adverse impact on its competitive position.
Seasonality
The Company's business is generally not subject to seasonal variations that
would impact sales, production or net income.
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Significant Customers
No single customer accounted for more than 10% of total net sales in 1995,
1994 or 1993. The Company does not believe that the loss of any single
customer would have a material adverse effect on the Company.
Backlog
The Company's backlog of scheduled but unshipped orders was $5.2 million at
March 1, 1996 and $2.8 million at December 31, 1995. The March 1, 1996
backlog is expected to be filled during the current fiscal year.
Competition
The Company's market share in the medical and photographic instrument
markets is substantial with few competitors.
There are eight firms producing competing products in the graphic
arts/digital imaging categories; MacBeth, a division of Kollmorgen
Corporation, Gretag Color Control Systems, Tobias Associates, Graphics
Microsystems, Inc., Light Source, Inc., Ihara Electronic Industries Co.,
Ltd., Viptronic GmbH, and Techkon Elektronik GmbH.
There are five major manufacturers of competing products in the color and
appearance market; Datacolor, Int., Minolta Corporation, the MacBeth
division of Kollmorgen Corporation, Hunter Associates Laboratory, Inc. and
Byk-Gardner.
The primary basis of competition for all the Company's products is quality,
design and service. The Company believes that superior quality and
features are competitive advantages for its products.
Research and Development
During 1995, 1994 and 1993, respectively, the Company spent $5,952,000,
$3,759,000 and $3,098,000 on research and development. X-Rite has no
customer-sponsored research and development activities.
Human Resources
As of March 1, 1996, the Company employed 517 persons; 493 in its U.S.
operations and 24 in its foreign subsidiaries. The Company believes that
its relations with employees are excellent.
(d) Financial Information About Foreign and Domestic Operations
- ----------------------------------------------------------------
See Note 1 to the consolidated financial statements contained in Part II,
Item 8 of this report.
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ITEM 2. PROPERTIES
Listed below are the principal properties owned or leased by X-Rite as of
March 1, 1996:
Owned
Location Principal Uses or Leased
-------------------- --------------------------- ---------
Grandville, MI Manufacturing, R&D, sales, Owned
customer service, warehouse
and administration
North Sutton, NH Manufacturing, R&D, sales, Owned
customer service, warehouse
and administration
Littleton, MA Customer service, R&D, and Leased
sales
Cheshire, England Sales and customer service Leased
Cologne, Germany Sales and customer service Leased
Hong Kong Sales and customer service Leased
Collectively, X-Rite and its subsidiaries own approximately 240,000 square
feet of space and lease approximately 13,000 square feet. During 1995, the
Company purchased land and a 52,000 square foot building adjacent to its
headquarters for future expansion purposes; the property is currently not
occupied by the Company. Management considers all the Company's properties
and equipment to be well maintained, in excellent operating condition, and
suitable and adequate for their intended purposes.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently engaged in any material litigation within the
meaning of Regulation S-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the names, ages and positions of all of the
Company's executive officers. Officers are elected annually by the Board
of Directors at the first meeting of the Board following the Annual Meeting
of Shareholders.
Position
Name Age Position Held Since
- -------------------- ----- --------------------------- ----------
Ted Thompson 66 Chief Executive Officer 1976
Bernard J. Berg 52 Vice President, Engineering 1983
Duane F. Kluting 46 Vice President, Chief
Financial Officer 1992 (1)
Jeffrey L. Smolinski 34 Vice President, Operations 1994 (2)
Joan M. Andrew 37 Vice President, Sales &
Marketing 1995 (3)
(1) Duane Kluting joined X-Rite as Vice President, Chief Financial Officer
in January of 1992. Prior to joining X-Rite, Mr. Kluting was Vice
President, Dealer Distribution, for Herman Miller, Inc. (office
furniture manufacturer) from February 1988 to January 1992, and
Director, Dealer Distribution for approximately three years prior to
February 1988.
(2) Jeffrey Smolinski joined X-Rite as Vice President, Operations in
December of 1994. Mr. Smolinski previously worked for La-Z-Boy Chair
Company as Director of Engineering from 1993 to 1994, Director of
Operations from 1991 to 1993, and Director of Advanced Technologies
from 1988 to 1991.
(3) Joan Andrew became the Company's Vice President, Sales and Marketing
in December of 1995. Prior to joining X-Rite, Ms. Andrew was Vice
President, Sales and Marketing for Bell & Howell's Document Management
Products Company from 1992 to 1995, Vice President-Marketing and New
Business Development from 1991 to 1992, and General Manager, Scanners
from 1989 to 1991.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's common stock is traded over the counter on The Nasdaq Stock
Market under the symbol XRIT. As of March 1, 1996, there were
approximately 1,800 shareholders of record. Ranges of high and low sales
prices, adjusted for the 100 percent stock dividend declared in 1994,
reported by The Nasdaq Stock Market for the past two fiscal years appear in
the following table.
Dividends
High Low Per Share
------ ------ ---------
Year Ended December 31, 1995:
Fourth Quarter $18.75 $13.75 $.025
Third Quarter 20.00 17.00 .025
Second Quarter 24.00 16.25 .025
First Quarter 21.00 15.00 .025
Year Ended December 31, 1994:
Fourth Quarter $21.00 $16.13 $.02
Third Quarter 17.75 11.88 .02
Second Quarter 13.50 10.50 .02
First Quarter 12.25 10.50 .02
The Board of Directors intends to continue paying dividends at the current
rate of 2.5 cents per share in the foreseeable future, and retain the
balance of the Company's earnings for use in the expansion of its
businesses.
ITEM 6. SELECTED FINANCIAL DATA
(in thousands except per share data)
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
Net sales $72,634 $59,475 $39,189 $36,170 $29,105
Net income 9,871 12,646 7,527 7,062 4,735
Net income per share (1) .47 .60 .36 .34 .23
Dividends per share (1) .10 .08 .08 .06 .04
Total assets 63,507 54,558 41,855 35,789 30,488
Long-term debt at year end -0- -0- -0- -0- -0-
(1) Retroactively adjusted to reflect two-for-one stock splits occurring
in 1992 and 1994.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth information derived from the Company's
consolidated statements of income expressed as a percentage of net sales.
1995 1994 1993
------ ------ ------
Net sales 100.0% 100.0% 100.0%
Cost of sales 34.6 30.3 31.2
------ ------ ------
Gross profit 65.4 69.7 68.8
Operating expenses:
Selling & marketing 21.7 20.8 23.1
Engineering, general
& administrative 15.5 12.6 12.8
Research & development 8.2 6.3 7.9
------ ------ ------
45.4 39.7 43.8
------ ------ ------
Operating income 20.0 30.0 25.0
Other income 0.2 1.0 1.6
------ ------ ------
Income before income taxes 20.2 31.0 26.6
Income taxes 6.6 9.7 7.4
------ ------ ------
Net income 13.6% 21.3% 19.2%
====== ====== ======
Net Sales
Net sales increased 22.2%, 51.8% and 8.3% during 1995, 1994 and 1993,
respectively. The increase in sales in 1995 was mainly due to the
inclusion of $7.9 million in sales from Labsphere, Inc. ("Labsphere"), a
company acquired by X-Rite in the first quarter of 1995. Excluding the
Labsphere sales, X-Rite's sales in 1995 increased 8.8% compared to 1994.
All other increases in net sales from year to year are a result of unit
volume increases; price increases have had a nominal effect on sales
levels.
Gross Profit
Gross profit as a percentage of sales declined in 1995 compared to 1994 and
1993 due to higher labor costs and a change in product mix. The inclusion
of Labsphere sales in 1995 also contributed to the margin decline; gross
profit earned on the sales of those products is typically less than gross
profit earned on sales of X-Rite products.
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Selling and Marketing Expenses
As a percentage of sales, selling and marketing expenses increased slightly
in 1995 when compared with 1994. The increase was due to higher trade show
costs and increased marketing expenditures for new product introductions.
Spending levels in 1993 reflected an increased investment that year in
sales and marketing staffing and additional advertising and promotion costs
associated with new product introductions. The Company will continue to
invest in its sales and marketing efforts in order to position itself for
continued long-term growth in new and existing markets.
Engineering, General and Administrative
Engineering, general and administrative ("EG&A") expenses increased as a
percentage of sales in 1995 compared to 1994 due to several factors. The
Company continued to increase its investment commitment to its foreign
subsidiary operations, where management believes the greatest long-term
sales growth opportunities exist. Costs to fully absorb the Colorgen
assets acquired in 1994 were higher than expected in 1995 as the Company
made investments to ramp up that product line for future growth, in
addition to incurring costs to reorganize and streamline those operations.
EG&A expenses in 1995 also included amortization of Labsphere costs in
excess of net assets acquired and amortization of Colorgen databases; those
expenses were not comparable to 1994 costs. Additional salaries and other
costs were also incurred in 1995 in anticipation of sales growth that was
greater than actual results. EG&A expenses as a percentage of sales were
comparable in 1994 and 1993.
Research and Development
As a result of the Company's ongoing commitment to future product
developments, research and development ("R&D") expenditures have increased
in each of the last three years. As a percentage of sales, R&D spending
increased in 1995 compared to 1994 due to a conscious effort by the Company
to invest more resources in this important activity. The decline in R&D
spending, as a percentage of sales, from 1993 to 1994 was a result of
spending not keeping pace with the significant sales growth that year.
In addition to the R&D costs reported as operating expenses, there were
costs incurred to develop new software products in each of the last three
years that were not included with R&D expenses. Those costs were
capitalized and the related amortization expense was included in cost of
sales (see Note 2 to the accompanying financial statements). Software
development costs capitalized were $833,000, $658,000 and $350,000 in 1995,
1994 and 1993, respectively. The Company will continue increasing its
investment in leading edge technology in order to advance efforts in
strategic product development.
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Other Income
Interest income earned in 1995 was less than 1994 and 1993 due to a
reduction in funds available for investment. Substantially all of the
Company's short-term investments were used in February of 1995 to acquire
Labsphere and to retire Labsphere's long-term debt. Interest income earned
in 1994 and 1993 was indicative of the funds available to invest and of the
tax-exempt investment yields during those years.
Income Taxes
The effective tax rate in 1995 was 32.8% compared to 31.2% in 1994. The
increase was due mainly to nondeductible amortization of costs in excess of
net assets acquired in 1995 and higher foreign income taxes. The increase
in the 1994 effective tax rate over the 1993 rate of 27.9% was primarily
due to the statutory federal tax rate being increased to thirty-five
percent from thirty-four percent, in addition to a onetime benefit
recognized in 1993 due to the adoption of new income tax accounting rules.
Liquidity and Capital Resources
X-Rite has maintained a strong financial position with excellent liquidity.
Cash provided by operating activities in 1995 was a record $12 million.
Working capital on December 31, 1995 was $28.3 million, representing a
ratio of current assets to current liabilities of 8.8:1.
The most significant investment transaction in 1995 was the purchase of
100% of the outstanding stock of Labsphere for $11.5 million. Shortly
after the acquisition, the Company retired $1.8 million of Labsphere's
long-term debt. Cash from the liquidation of short-term investments was
used to fund the acquisition and subsequent retirement of long-term debt.
Capital expenditures in 1995 included $2.4 million to purchase equipment
and $4 million to purchase a building and land adjacent to X-Rite's
existing headquarters; those expenditures were financed with cash flow from
operations. The Company expects capital expenditures in 1996 to total $2.5
million and will consist mainly of machinery and equipment.
Management expects that X-Rite's current liquidity, combined with cash flow
from future operations and the Company's $20 million revolving credit
agreement, will be sufficient to finance the Company's operations, capital
expenditures and dividends in 1996.
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Inflation
The Company has experienced the effects of inflation on its business
through increases in the cost of services, employee compensation and fringe
benefits. Although modest adjustments to selling prices have mitigated the
effects of inflation, the Company continues to explore ways to improve
productivity and reduce operating costs. The Company does not anticipate
any significant adverse impact from inflation in the coming year.
Substantially all of the Company's foreign transactions are invoiced and
paid in U.S. dollars.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following report, financial statements and notes are included with this
report:
Report of Independent Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Shareholders' Investment
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
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Report of Independent Public Accountants
To the Shareholders of X-Rite, Incorporated:
We have audited the accompanying consolidated balance sheets of X-Rite,
Incorporated (a Michigan corporation) and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of income,
shareholders' investment and cash flows for each of the three years in the
period ended December 31, 1995. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of X-Rite, Incorporated
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
/S/ ARTHUR ANDERSEN LLP
Grand Rapids, Michigan,
January 26, 1996
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X-RITE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1995 1994
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 332,000 $ 1,171,000
Short-term investments 4,073,000 13,762,000
Accounts receivable, less allowances of
$574,000 in 1995 and $251,000 in 1994 13,168,000 10,211,000
Inventories 12,835,000 12,858,000
Deferred tax assets 792,000 557,000
Prepaid expenses and other current assets 683,000 862,000
----------- -----------
Total current assets 31,883,000 39,421,000
PLANT AND EQUIPMENT:
Land 1,980,000 848,000
Buildings and improvements 8,560,000 6,339,000
Machinery and equipment 8,356,000 6,350,000
Furniture and office equipment 5,891,000 4,173,000
Construction in progress 320,000 544,000
----------- -----------
25,107,000 18,254,000
Less accumulated depreciation (9,825,000) (6,553,000)
----------- -----------
15,282,000 11,701,000
OTHER ASSETS:
Costs in excess of net assets acquired 10,098,000 255,000
Other noncurrent assets 6,244,000 3,181,000
----------- -----------
16,342,000 3,436,000
----------- -----------
$63,507,000 $54,558,000
=========== ===========
The accompanying notes are an integral part of these statements.
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X-RITE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--Continued
December 31,
1995 1994
----------- -----------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 1,499,000 $ 1,419,000
Accrued liabilities--
Payroll and employee benefits 785,000 508,000
Commissions 131,000 420,000
Income taxes 286,000 6,000
Other 925,000 495,000
----------- -----------
Total current liabilities 3,626,000 2,848,000
DEFERRED INCOME TAXES 611,000 578,000
SHAREHOLDERS' INVESTMENT:
Preferred stock, $.10 par value,
5,000,000 shares authorized; none issued - -
Common stock, $.10 par value, 50,000,000
shares authorized; 21,019,206 and
20,992,783 shares issued and outstanding
in 1995 and 1994, respectively 2,102,000 2,099,000
Additional paid-in capital 6,388,000 6,075,000
Retained earnings 50,781,000 43,010,000
Cumulative translation adjustment (1,000) (52,000)
----------- -----------
59,270,000 51,132,000
----------- -----------
$63,507,000 $54,558,000
=========== ===========
The accompanying notes are an integral part of these statements.
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X-RITE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31,
1995 1994 1993
----------- ----------- -----------
Net sales $72,634,000 $59,475,000 $39,189,000
Cost of sales 25,096,000 18,000,000 12,220,000
----------- ----------- -----------
Gross profit 47,538,000 41,475,000 26,969,000
Operating expenses:
Selling & marketing 15,737,000 12,403,000 9,064,000
Engineering, general
& administrative 11,280,000 7,515,000 4,996,000
Research & development 5,952,000 3,759,000 3,098,000
----------- ----------- -----------
32,969,000 23,677,000 17,158,000
----------- ----------- -----------
Operating income 14,569,000 17,798,000 9,811,000
Other income 111,000 590,000 626,000
----------- ----------- -----------
Income before income taxes 14,680,000 18,388,000 10,437,000
Income taxes 4,809,000 5,742,000 2,910,000
----------- ----------- -----------
NET INCOME $ 9,871,000 $12,646,000 $ 7,527,000
=========== =========== ===========
Earnings per share $.47 $.60 $.36
==== ==== ====
The accompanying notes are an integral part of these statements.
-17-
18
X-RITE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
Additional Cumulative Total
Common Paid-in Retained Translation Shareholders'
Stock Capital Earnings Adjustment Investment
---------- ---------- ----------- ---------- ------------
BALANCES,
JANUARY 1, 1993 $1,045,000 $6,433,000 $26,186,000 $ - $33,664,000
Net income - - 7,527,000 - 7,527,000
Cash dividends declared
of $.08 per share - - (1,673,000) - (1,673,000)
Issuance of 17,481 shares
of common stock under
employee benefit plans 2,000 284,000 - - 286,000
Translation adjustment - - - 14,000 14,000
---------- ---------- ----------- -------- -----------
BALANCES,
DECEMBER 31, 1993 1,047,000 6,717,000 32,040,000 14,000 39,818,000
Net income - - 12,646,000 - 12,646,000
Cash dividends declared
of $.08 per share - - (1,676,000) - (1,676,000)
Issuance of 29,062 shares
of common stock under
employee benefit plans 3,000 407,000 - - 410,000
Issuance of 10,495,134
shares of common stock
in connection with a
two-for-one stock split 1,049,000 (1,049,000) - - -
Translation adjustment - - - (66,000) (66,000)
---------- ---------- ----------- -------- -----------
BALANCES,
DECEMBER 31, 1994 2,099,000 6,075,000 43,010,000 (52,000) 51,132,000
Net income - - 9,871,000 - 9,871,000
Cash dividends declared
of $.10 per share - - (2,100,000) - (2,100,000)
Issuance of 26,423 shares
of common stock under
employee benefit plans 3,000 313,000 - - 316,000
Translation adjustment - - - 51,000 51,000
---------- ---------- ----------- -------- -----------
BALANCES,
DECEMBER 31, 1995 $2,102,000 $6,388,000 $50,781,000 $ (1,000) $59,270,000
========== ========== =========== ======== ===========
The accompanying notes are an integral part of these statements.
-18-
19
X-RITE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
1995 1994 1993
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,871,000 $12,646,000 $ 7,527,000
Adjustments to reconcile net income to net
cash and cash equivalents provided by
(used for) operating activities-
Depreciation and amortization 3,430,000 1,473,000 1,213,000
Provision for doubtful accounts 350,000 52,000 11,000
Deferred income taxes (105,000) (1,000) (195,000)
Changes in operating assets and liabilities
net of effects from acquisitions:
Accounts receivable (2,258,000) (3,344,000) (1,409,000)
Inventories 1,002,000 (5,563,000) (667,000)
Other current and noncurrent assets 380,000 (533,000) (123,000)
Accounts payable (529,000) 197,000 81,000
Other accrued liabilities (184,000) 555,000 (129,000)
----------- ----------- -----------
Net cash and cash equivalents
provided by operating activities 11,957,000 5,482,000 6,309,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments 13,772,000 12,559,000 -
Purchases of investments (4,200,000) (10,610,000) (2,011,000)
Capital expenditures (3,413,000) (4,173,000) (1,536,000)
Acquisitions, less cash acquired (11,490,000) (274,000) -
Purchases of other assets (4,041,000) (3,156,000) (579,000)
Other investing activities 178,000 - -
----------- ----------- -----------
Net cash and cash equivalents
used for investing activities (9,194,000) (5,654,000) (4,126,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of Labsphere, Inc. long-term debt (1,795,000) - -
Dividends paid (2,100,000) (1,676,000) (1,673,000)
Issuance of common stock 316,000 410,000 286,000
----------- ----------- -----------
Net cash and cash equivalents
used for financing activities (3,579,000) (1,266,000) (1,387,000)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (23,000) 65,000 27,000
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (839,000) (1,373,000) 823,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,171,000 2,544,000 1,721,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 332,000 $ 1,171,000 $ 2,544,000
=========== =========== ===========
The accompanying notes are an integral part of these statements.
-19-
20
X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--THE COMPANY AND OTHER INFORMATION
X-Rite, Incorporated and its wholly-owned subsidiaries (individually
"X-Rite" and with its subsidiaries the "Company") are engaged in the
development, manufacture and sale of quality control instruments and
accessories which measure color and appearance, optical density,
photographic density, and various types of light sources. Principal
markets for the Company's products include the paint, plastic, textile,
packaging, photographic, graphic arts and medical industries, in addition
to commercial and research laboratories. Based on the nature of its
products, the Company considers its business to be operating in a single
industry segment.
Products are sold worldwide through the Company's own sales personnel and
through independent sales representatives. The Company is headquartered in
Grandville, Michigan and has operations in New Hampshire and Massachusetts.
In addition, the Company has locations in Germany, England and Hong Kong.
Geographic sales information is as follows:
1995 1994 1993
----------- ----------- -----------
Domestic sales:
U.S. operations $48,968,000 $41,497,000 $27,950,000
International sales:
U.S. operations export sales
to unaffiliated customers 17,072,000 15,148,000 10,843,000
Foreign subsidiary sales 6,594,000 2,830,000 396,000
----------- ----------- -----------
23,666,000 17,978,000 11,239,000
----------- ----------- -----------
$72,634,000 $59,475,000 $39,189,000
=========== =========== ===========
No single customer accounted for more than 10% of total net sales in 1995,
1994 or 1993.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of X-Rite,
Incorporated and its wholly-owned domestic and foreign subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents:
The Company considers all highly liquid financial instruments with
maturities of three months or less when purchased to be cash equivalents.
-20-
21
X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Short-Term Investments:
Short-term investments consist primarily of municipal bonds and tax-exempt
industrial revenue bonds. All of the Company's short-term investments are
stated at the amortized cost, which approximates market, and are classified
as available for sale. Short-term investments at December 31, 1995 include
securities with original maturities of greater than three months and
remaining maturities of less than one year.
Inventories:
Inventories are stated at the lower of cost, determined on a first-in
first-out basis, or market. Components of inventories at December 31 are
summarized as follows:
1995 1994
----------- -----------
Raw materials $ 4,399,000 $ 3,294,000
Work in process 3,523,000 5,044,000
Finished goods 4,913,000 4,520,000
----------- -----------
$12,835,000 $12,858,000
=========== ===========
Plant, Equipment and Depreciation:
Plant and equipment are stated at cost and include expenditures for major
renewals and betterments. Maintenance and repairs that do not extend the
lives of the respective assets are charged to expense as incurred.
Depreciation expense is computed using the straight-line method over the
estimated useful lives of the related assets. Estimated depreciable lives
are as follows: buildings and improvements 5 to 32 years; machinery and
equipment, 3 to 10 years; and furniture and office equipment, 3 to 7 years.
Computer Software Development Costs:
The Company capitalized $833,000, $658,000 and $350,000 of software
development costs during 1995, 1994 and 1993, respectively.
Amortization of software development costs is computed using the straight-
line method over a three-year period. Amortization expense was $462,000,
$172,000 and $58,000 in 1995, 1994 and 1993, respectively. The net
capitalized software development costs included in other assets are
$1,163,000 and $778,000 as of December 31, 1995 and 1994, respectively.
Amounts expended to achieve technological feasibility are included in
research and development expenses.
-21-
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X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Costs in Excess of Net Assets Acquired:
Substantially all of X-Rite's costs in excess of net assets acquired result
from the 1995 acquisition of Labsphere, Inc. (see Note 6). These costs are
being amortized using the straight-line method over twenty years. At each
balance sheet date, the recoverability of these costs is evaluated by
determining whether the unamortized balance can be recovered through
undiscounted future operating cash flows of the acquired businesses.
Accumulated amortization of excess acquisition costs was $511,000 and
$20,000 at December 31, 1995 and 1994, respectively.
Income Taxes:
The provision for income taxes is based on earnings reported in the
financial statements. Deferred income taxes are recognized for all
temporary differences between tax and financial reporting.
Revenue Recognition:
Revenue is recognized when a product is shipped or a service is performed.
Advertising Costs:
Advertising costs are charged to operations in the period incurred and
totaled $2,172,000, $1,773,000 and $1,623,000 in 1995, 1994 and 1993,
respectively.
Stock Split:
On November 15, 1994, the Company's Board of Directors declared a two-for-
one stock split, paid December 27, 1994, in the form of a 100% stock
dividend to shareholders of record on December 15, 1994. All references to
the number of common shares and per share amounts in the financial
statements have been adjusted to reflect the stock split on a retroactive
basis.
Per Share Data:
Earnings per share were computed based on the weighted average number of
shares of common stock and common stock equivalents outstanding. For 1995,
1994 and 1993, these weighted averages were 21,172,436, 21,078,054 and
20,978,136 shares, respectively.
Foreign Currency Translation:
Foreign currency balance sheet accounts are translated into United States
dollars at the exchange rate in effect at year end. Income statement
accounts are translated at the average rate of exchange in effect during
the year. The resulting translation adjustments are recorded as a separate
component of shareholders' investment.
-22-
23
X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates;
however, management believes that any subsequent revisions to estimates
used would not have a material effect on the financial condition or results
of operations of the Company.
Reclassifications:
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform with the 1995 presentation.
NOTE 3--REVOLVING CREDIT AGREEMENT
The Company maintains a revolving line of credit agreement with a bank
which provides for maximum borrowings of $20,000,000 with interest at 1.5%
over the "Effective Federal Funds Rate" (6.23% at December 31, 1995). The
borrowings are unsecured and no compensating balances are required by the
agreement. There were no significant borrowings under this agreement
during 1995, 1994 or 1993.
NOTE 4--INCOME TAXES
The provision for income taxes at December 31 consisted of the following:
1995 1994 1993
---------- ---------- ----------
Current-
Federal $4,777,000 $5,669,000 $3,071,000
State 90,000 50,000 34,000
Foreign 47,000 20,000 -
---------- ---------- ----------
4,914,000 5,739,000 3,105,000
Deferred-
Federal (261,000) 5,000 (41,000)
Foreign 156,000 (2,000) (154,000)
---------- ---------- ----------
(105,000) 3,000 (195,000)
---------- ---------- ----------
$4,809,000 $5,742,000 $2,910,000
========== ========== ==========
-23-
24
X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4--INCOME TAXES, continued
The provision for income taxes reflects effective tax rates of 32.8%, 31.2%
and 27.9% in 1995, 1994 and 1993, respectively. A reconciliation of income
taxes which would have been computed by applying the statutory federal
income tax rate to income before provision for income taxes and the
provision for income taxes as presented in the accompanying consolidated
statements of income for the years ended December 31 is as follows:
1995 1994 1993
---------- ---------- ----------
Income tax at statutory rates $5,038,000 $6,436,000 $3,549,000
Foreign sales corporation (279,000) (258,000) (139,000)
Research and development
credit (182,000) (222,000) (138,000)
Tax-exempt interest income (57,000) (142,000) (192,000)
Impact of adopting SFAS 109 - - (180,000)
Other 289,000 (72,000) 10,000
---------- ---------- ----------
$4,809,000 $5,742,000 $2,910,000
========== ========== ==========
Major components of the Company's deferred tax assets and liabilities at
December 31 are as follows:
1995 1994
-------- --------
Assets:
Inventory reserves and tax valuation $517,000 $449,000
Accounts receivable reserves 193,000 88,000
Foreign net operating loss carryforward - 60,000
Employee benefits 54,000 22,000
Other 115,000 2,000
-------- --------
$879,000 $621,000
======== ========
Liabilities:
Software development costs $395,000 $272,000
Depreciation 252,000 212,000
Prepaid expenses and other 51,000 -
-------- --------
$698,000 $484,000
======== ========
The foreign net operating loss carryforward is included in other noncurrent
assets in the accompanying balance sheet at December 31, 1994.
Cash expended for income taxes was $3,940,000, $5,973,000 and $3,190,000 in
1995, 1994 and 1993, respectively.
-24-
25
X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5--EMPLOYEE BENEFIT AND STOCK PLANS
The Company maintains 401(k) retirement savings plans for the benefit of
substantially all full-time U.S. employees. Participant contributions are
matched by the Company based on applicable matching formulas. The
Company's matching expense for the plans was $232,000, $158,000 and
$113,000 in 1995, 1994 and 1993, respectively.
The Company has an employee stock purchase plan for the benefit of
substantially all full-time U.S. employees. Eligible employees may
purchase shares of the Company's common stock through payroll deduction at
85% of the market price on the date purchased. No amounts are charged to
operations under this plan. During 1995, 1994 and 1993, employees
purchased 14,398, 11,285 and 10,962 shares at average prices of $14.86,
$12.59 and $9.30 per share, respectively. At December 31, 1995, 925,543
shares were available for future purchases.
The Company has stock option plans which cover 2,800,000 shares of common
stock under which options may be granted to key employees and the Company's
board of directors. Options are granted at market price at the date of
grant, and are exercisable within limits specified at the time of grant,
but no option is exercisable more than ten years from the date of grant.
At December 31, 1995, 2,476,143 options were available for future issuance.
No charges to operations are recorded with respect to authorization, grant
or exercise of these options.
-25-
26
X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5--EMPLOYEE BENEFIT AND STOCK PLANS, continued
A summary of shares subject to options follows:
Shares Price Range
------- ---------------
Outstanding at January 1, 1993 212,000 $ 2.47 - $ 7.03
Granted 82,000 10.88
Exercised (24,000) 2.47 - 3.00
Canceled (12,000) 6.19
-------
Outstanding at December 31, 1993 258,000 2.47 - 10.88
Granted 212,000 10.13 - 12.00
Exercised (46,324) 2.47 - 12.00
Canceled (15,676) 2.47 - 12.00
-------
Outstanding at December 31, 1994 408,000 2.47 - 12.00
Granted 185,000 14.75 - 19.50
Exercised (5,025) 10.88 - 12.00
Canceled (9,475) 10.88 - 19.50
-------
Outstanding at December 31, 1995 578,500 $ 2.47 - $19.50
=======
Exercisable at December 31, 1995 460,000 $ 2.47 - $18.00
=======
The Company has a restricted stock plan covering 400,000 shares of common
stock. Shares awarded under this plan entitle the shareholder to all
rights of common stock ownership except that the shares may not be sold,
transferred, pledged, exchanged or otherwise disposed of during the
restriction period. The restriction period is determined by a committee,
appointed by the board of directors, but in no event shall have a duration
period in excess of ten years. No shares were awarded in 1995, 1994 or
1993. At December 31, 1995, there were 345,200 shares available for future
awards.
-26-
27
X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6--ACQUISITIONS
In February of 1995 the Company acquired all the outstanding stock of
Labsphere, Inc. ("Labsphere") for $11,500,000 in cash. The acquisition was
accounted for under the purchase method of accounting and was funded by
short-term investments. Labsphere is a leading manufacturer of light
measurement and light source integrating sphere systems and
instrumentation. Had the acquisition of Labsphere occurred on January 1,
1994, net sales, net income and earnings per share for the year ended
December 31, 1994 would have been $66,419,999, $12,076,000 and $.57,
respectively (unaudited).
In July of 1994, the Company acquired from the First National Bank of
Boston substantially all of the assets of Colorgen, Inc. ("Colorgen") for
$4,500,000 in cash, funded by short-term investments. The Company has
discontinued the product lines previously marketed by Colorgen. The
primary objective of the acquisition was to obtain paint formulation
databases. These databases are costly and time-consuming to develop, and
are currently being used in connection with certain of the Company s
existing products.
NOTE 7--QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data are summarized as follows:
Earnings
Net Gross Operating Net Per
Quarter Sales Profit Income Income Share
----------- ----------- ----------- ----------- ----------- --------
1995:
First $17,946,000 $12,515,000 $ 4,803,000 $ 3,303,000 $.16
Second 18,906,000 12,383,000 3,716,000 2,553,000 .12
Third 18,755,000 11,912,000 3,848,000 2,531,000 .12
Fourth 17,027,000 10,728,000 2,202,000 1,484,000 .07
----------- ----------- ----------- ----------- ----
$72,634,000 $47,538,000 $14,569,000 $ 9,871,000 $.47
=========== =========== =========== =========== ====
1994:
First $12,353,000 $ 8,501,000 $ 3,751,000 $ 2,578,000 $.12
Second 14,758,000 10,387,000 4,723,000 3,259,000 .15
Third 15,638,000 10,948,000 4,616,000 3,322,000 .16
Fourth 16,726,000 11,639,000 4,708,000 3,487,000 .17
----------- ----------- ----------- ----------- ----
$59,475,000 $41,475,000 $17,798,000 $12,646,000 $.60
=========== =========== =========== =========== ====
-27-
28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors
Information relating to directors appearing under the caption "Election of
Directors" in the definitive Proxy Statement for the 1996 Annual Meeting of
shareholders and filed with the Commission is incorporated herein by
reference.
(b) Officers
Information relating to executive officers is included in this report in
the last section of Part I under the caption "Executive Officers of the
Registrant."
(c) Compliance With Section 16(a)
Information concerning compliance with Section 16(a) of the Securities
Exchange Act of 1934 appearing under the caption "Compliance With Reporting
Requirements" in the definitive Proxy Statement for the 1996 Annual meeting
of Shareholders and filed with the Commission is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "Executive Compensation"
contained in the definitive Proxy Statement for the 1996 Annual Meeting of
Shareholders and filed with the Commission is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the captioned "Securities Ownership of
Management" contained in the definitive Proxy Statement for the 1996 Annual
Meeting of Shareholders and filed with the Commission is hereby
incorporated herein by reference.
-28-
29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) The following financial statements, all of which are set forth in Item
8, are filed as a part of this report:
Report of Independent Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Shareholders' Investment
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(b) No reports on Form 8-K were filed for the 3-month period ended
December 31, 1995.
(c) See Exhibit Index located on page 31.
(d) All other schedules required by Form 10-K Annual Report have been
omitted because they were inapplicable, included in the notes to the
consolidated financial statements, or otherwise not required under the
instructions contained in Regulation S-X.
-29-
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
X-RITE, INCORPORATED
March 19, 1996 /s/ Ted Thompson
----------------------------------
Ted Thompson, Chairman and
Chief Executive Officer
March 19, 1996 /s/ Duane Kluting
----------------------------------
Duane Kluting, Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below on this 19th day of March, 1996, by the
following persons on behalf of the Registrant and in the capacities
indicated.
Each director of the Registrant whose signature appears below, hereby
appoints Ted Thompson and Duane Kluting, and each of them individually as
his attorney-in-fact to sign in his name and on his behalf as a Director of
the Registrant, and to file with the Commission any and all amendments to
this report on Form 10-K to the same extent and with the same effect as if
done personally.
/s/ Ted Thompson /s/ Leonard C. Blanding
- ---------------------------------- ----------------------------------
Ted Thompson, Director Leonard C. Blanding, Director
/s/ Dr. Marvin G. DeVries /s/ Lawrence E. Fleming
- ---------------------------------- ----------------------------------
Dr. Marvin G. DeVries, Director Lawrence E. Fleming, Director
/s/ Rufus S. Teesdale /s/ Ronald A. VandenBerg
- ---------------------------------- ----------------------------------
Rufus S. Teesdale, Director Ronald A. VandenBerg, Director
/s/ Charles VanNamen /s/ Glenn M. Walters
- ---------------------------------- ----------------------------------
Charles VanNamen, Director Glenn M. Walters, Director
/s/ Quinten E. Ward
- ----------------------------------
Quinten E. Ward, Director
-30-
31
EXHIBIT INDEX
Exhibit Page
Number Description Number
- -------- ----------------------------------------------------- --------
3(a) Restated Articles of Incorporation (filed as exhibit n/a
to Form S-18 dated April 10, 1986 (Registration No.
33-3954C) and incorporated herein by reference)
3(b) Certificate of Amendment to Restated Articles of n/a
Incorporation adding Article IX (filed as exhibit to
Form 10-Q for the quarter ended June 30, 1987
(Commission File No. 0-14800) and incorporated
herein by reference)
3(c) Certificate of Amendment to Restated Articles of 33
Incorporation amending Article III as filed with the
Michigan Department of Commerce; stamped received on
December 11, 1995, and stamped filed on December 13,
1995
3(d) Bylaws, as amended through June 16, 1994 (filed as n/a
exhibit to Form 10-K for the year ended December 31,
1994 (Commission File No. 0-14800) and incorporated
herein by reference)
3(e) First amendment to amended Bylaws amending Article IV 36
4 X-Rite, Incorporated common stock certificate n/a
specimen (filed as exhibit to Form 10-Q for the
quarter ended June 30, 1986 (Commission File No.
0-14800) and incorporated herein by reference)
The following material contracts identified with "*" preceding the exhibit
number are agreements or compensation plans with or relating to executive
officers, directors or related parties.
*10(a) X-Rite, Incorporated 1993 Outside Director Stock n/a
Option Plan (filed as exhibit to Form S-8 dated
July 19, 1994 (Commission File No. 0-14800) and
incorporated herein by reference)
*10(b) X-Rite, Incorporated 1993 Employee Stock Option Plan n/a
(filed as exhibit to Form S-8 dated July 19, 1994
(Commission File No. 0-14800) and incorporated herein
by reference)
-31-
32
EXHIBIT INDEX
Exhibit Page
Number Description Number
- -------- ----------------------------------------------------- --------
*10(c) Form of Indemnity Contract entered into between the n/a
registrant and certain persons, together with a list
of such persons (filed as exhibit to Form 10-Q for
the quarter ended September 30, 1995 (Commission File
No. 0-14800) and incorporated herein by reference)
10(d) Exchange Agreement entered into between the n/a
registrant and Ronald L. Sisson (filed as exhibit to
Form 10-K for the year ended December 31, 1994
(Commission File No. 0-14800) and incorporated herein
by reference)
21 Subsidiaries of the registrant 37
23 Consent of independent accountants 38
27 Financial Data Schedule n/a
-32-
33
Exhibit 3(c)
________________________________________________________________________
| MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU |
|________________________________________________________________________|
| Date Received | | (FOR BUREAU USE ONLY) |
| | | |
|_______________|_______________| |
| | | |
| | | |
|_______________|_______________|_______________________ |
|Name JOSEPH B. LEVAN | |
|_______________________________________________________| |
|Address P.O. BOX 352 | |
|_______________________________________________________| |
|City GRAND RAPIDS State MI Zip Code 49501-0352|Effective Date: |
|_______________________________________________________|________________|
^Document will be returned to the name and address you enter above^
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Corporations
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations),
the undersigned corporation executes the following Certificate:
________________________________________________________________________
| |
| 1. The present name of the corporation is: X-RITE, INCORPORATED |
| |
| 2. The corporation identification number (CID) assigned by the |
| Bureau is: 091-366 |
| |
| 3. The location of its registered office is: |
| |
| 3100 44TH STREET, S.W., GRANDVILLE, MICHIGAN 49418 |
|________________________________________________________________________|
________________________________________________________________________
| |
| 4. Article III of the Articles of Incorporation is hereby amended to |
| read as follows: |
| |
| ARTICLE III. |
| AUTHORIZED CAPITAL STOCK |
| |
| A. The total authorized capital stock of this Corporation is fifty |
| million (50,000,000) shares of common stock of the par value of ten |
| cents ($.10) per share and five million (5,000,000) shares of preferred|
| stock of the par value of ten cents ($.10) per share. |
| (continued on next page) |
|________________________________________________________________________|
-33-
34
________________________________________________________________________
| |
| Common Stock |
| |
| B. The authorized shares of common stock of the par value of ten |
| cents ($.10) per share are all of one class and each share of common |
| stock is equal in every respect to every other share of common stock. |
| The holders of common stock shall be entitled to one (1) vote in person|
| or by proxy for each share of common stock held. In the event of |
| liquidation, dissolution, or winding up of the Corporation, whether |
| voluntary or involuntary, the holders of common stock of the |
| Corporation shall be entitled to participate ratably according to their|
| respective holdings in the division of the assets of the Corporation |
| which remain after payment in full of all amounts owing to creditors of|
| the Corporation and of all amounts payable to holders of preferred |
| stock of the Corporation which has been issued with preferential rights|
| upon liquidation, dissolution, or winding up of the Corporation. |
| Holders of common stock shall have the right to participate ratably |
| according to their respective holdings in such dividends and |
| distributions as may be declared by the Board of Directors of the |
| Corporation and paid on the common stock of the Corporation from time |
| to time from funds legally available for that purpose, subject to the |
| prior right of holders of preferred stock of the Corporation to receive|
| such distributions and dividends where such preferred stock of the |
| Corporation has been issued with a preference as to such distributions |
| and dividends. The holders of common stock of the Corporation shall |
| not be entitled to convert common stock into any other class of stock |
| of the Corporation, whether now or hereafter issued. The holders of |
| common stock of the Corporation shall have no preemptive rights to |
| purchase or to subscribe to any shares of any class of stock issued by |
| the Corporation, now or hereafter, whether voting or non-voting; or to |
| any securities exchangeable for or convertible into such shares; or to |
| any warrants or other instruments evidencing rights or options to |
| subscribe for, purchase, or otherwise acquire such shares. All shares |
| of common stock issued by the Corporation shall be deemed fully paid |
| and non-assessable. The holders of common stock shall have no voting |
| rights with respect to issuance of preferred stock or the rights, |
| preferences or limitations of preferred stock, which matters are |
| reserved exclusively to the Corporation s Board of Directors. |
| |
| Preferred Stock |
| C. The authorized shares of preferred stock of the par value of ten |
| cents ($.10) may be divided into and issued in one or more series. The|
| Board of Directors is hereby authorized to cause the preferred stock to|
| be issued from time to time in one or more series, with such |
| designations and such relative voting, dividend, liquidation and other |
| rights, preferences and limitations as shall be stated and expressed in|
| the resolution or resolutions providing for the issue of such preferred|
| stock adopted by the Board of Directors. The Board of Directors by |
| vote of majority of the whole Board is expressly authorized to adopt |
| such resolution or resolutions and issue such stock from time to time |
| as it may deem desirable. |
|________________________________________________________________________|
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35
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS
CONSENT OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD
OF DIRECTORS OR TRUSTEES; OTHERWISE, COMPLETE SECTION (b). DO NOT
COMPLETE BOTH.
a.___ The foregoing amendment to the Articles of Incorporation was duly
adopted on the ____ day of ___________, 19___, in accordance with the
provisions of the Act by the unanimous consent of the incorporator(s)
before the first meeting of the board of directors or trustees.
Signed this__________________day of__________________________, 19___.
________________________________ ________________________________
(Signature) (Signature)
________________________________ ________________________________
(Type or Print Name) (Type or Print Name)
________________________________ ________________________________
(Signature) (Signature)
________________________________ ________________________________
(Type or Print Name) (Type or Print Name)
b._X_ The foregoing amendment to the Articles of Incorporation was duly
adopted on the ___11th___ day of ___May___, 1992. The amendment:
(check one of the following)
_X_ was duly adopted in accordance with Section 611(2) of the Act by
the vote of the shareholders if a profit corporation, or by the
vote of the shareholders or members if a nonprofit corporation, or
by the vote of directors if a nonprofit corporation organized on a
nonstock directorship basis. The necessary votes were cast in
favor of the amendment.
___ was duly adopted by the written consent of all the directors pur-
suant to Section 525 of the Act and the corporation is a nonprofit
corporation organized on a nonstock directorship basis.
___ was duly adopted by the written consent of the shareholders or
members having not less than the minimum number of votes required
by statute in accordance with Section 407(1) and (2) of the Act if
a nonprofit corporation, and Section 407(1) of the Act if a profit
corporation. Written notice to shareholders or members who have
not consented in writing has been given. (Note: Written consent by
less than all of the shareholders or members is permitted only if
such provision appears in the Articles of Incorporation.)
___ was duly adopted by the written consent of all the shareholders or
members entitled to vote in accordance with Section 407(3) of the
Act if a non-profit corporation, and Section 407(2) of the Act if
a profit corporation.
Signed this ___8th___ day of December, 1995
By _____/s/Ted Thompson__________________________
(Only signature of: President, Vice President,
Chairperson and Vice-Chairperson)
____Ted Thompson, Chairman_______________________
(Type or Print Name) (Type or Print Title)
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36
Exhibit 3(e)
X-RITE, INCORPORATED
FIRST AMENDMENT TO BYLAWS
AS AMENDED AND RESTATED NOVEMBER 15, 1994
The following provision is added to the Bylaws of X-Rite, Incorporated,
effective as of March 19, 1996:
Article IV, Section 11. Directors Emeritus.
- -------------------------------------------
Any director of the Corporation who has at least nine years of service as a
director and who either resigns as a director or does not stand for
reelection, shall automatically become a "Director Emeritus" and shall
continue in that position for a period equal to the time served as a
regular director or until an earlier resignation or death. During their
tenure, Directors Emeritus shall be given notices of all meetings of the
Board of Directors and copies of minutes of those meetings. Directors
Emeritus shall be entitled to attend and participate in all such meetings
of the Board of Directors, except that they may not vote and they shall not
be counted for purposes of determining a quorum. Directors Emeritus shall
receive the same annual retainer fee as is provided for regular directors
and shall be entitled to reimbursement for expenses of attendance at
meetings of the Board, but they shall receive no other compensation from
the Company.
SECRETARY'S CERTIFICATE
I, Duane Kluting, the undersigned Secretary of X-Rite, Incorporated, do
hereby certify that the foregoing amendment to the Corporation's Bylaws was
adopted at a duly called and convened meeting of the Board of Directors on
the 19th day of March, 1996, and the same remains in full force and effect
on the date hereof.
March 19, 1996 /s/ Duane Kluting
----------------------------------
Duane Kluting
Secretary
X-Rite, Incorporated
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37
Exhibit 21
X-RITE, INCORPORATED
LIST OF SUBSIDIARIES
1. X-Rite International, Inc., a U.S. Virgin Islands Corporation, is
a wholly owned subsidiary of X-Rite, Incorporated, being utilized
as a foreign sales corporation.
2. X-Rite Holdings, Inc., A U.S. Corporation, is a wholly owned
subsidiary of X-Rite, Incorporated, being utilized as a stockholder
of foreign subsidiaries.
3. X-Rite GmbH, a German Corporation, is wholly owned by X-Rite,
Incorporated and X-Rite Holdings, Inc., and being utilized as a
sales and service office.
4. X-Rite Asia Pacific Limited, a Hong Kong Corporation, is wholly
owned by X-Rite, Incorporated and X-Rite Holdings, Inc., and being
utilized as a sales office.
5. X-Rite Limited, a United Kingdom Corporation, is wholly owned by
X-Rite, Incorporated and being utilized as a sales and service
office.
6. X-Rite MA, Inc., a U.S. Corporation, is wholly owned by
X-Rite, Incorporated and being utilized as a sales and service
office.
7. OTP, Inc., a U.S. Corporation, is wholly owned by X-Rite,
Incorporated and being utilized to hold title to certain real
property of the Corporation.
8. Labsphere, Inc., a U.S. Corporation, is wholly owned by X-Rite,
Incorporated and is a manufacturer of light measurement systems
and related proprietary materials.
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38
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K, into the Company's previously
filed Registration Statement File Numbers 33-29288, 33-29290, 33-82258 and
33-82260.
/s/ Arthur Andersen LLP
Grand Rapids, Michigan
March 21, 1996
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