UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 2001
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 No. 0-14800
X-RITE, INCORPORATED
(Exact name of registrant as specified in its charter)
Michigan 38-1737300
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3100 44th Street, 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 $.10
per share, at November 1, 2001 was 21,299,597 shares.
Exhibit Index on page 17.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
X-RITE, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 29, December 30,
2001 2000
------------ -----------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,486 $ 18,595
Short-term investments 18,706 12,469
Accounts receivable, less allowances of
$1,317 in 2001 and $1,149 in 2000 13,640 19,463
Inventories 15,721 15,800
Deferred taxes 3,011 6,503
Prepaid expenses and other current assets 7,072 1,427
-------- --------
Total current assets 65,636 74,257
PROPERTY AND EQUIPMENT, at cost 50,698 46,912
Less accumulated depreciation (27,964) (25,046)
-------- --------
22,734 21,866
OTHER ASSETS:
Cash surrender values - founders policies 12,932 9,918
Costs in excess of net assets acquired 9,850 10,604
Other investments 8,635 4,610
Other noncurrent assets 4,241 4,428
-------- --------
35,658 29,560
-------- --------
$124,028 $125,683
======== ========
See accompanying notes to condensed consolidated financial statements.
X-RITE, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS--Continued
(in thousands)
September 29, December 30,
2001 2000
------------ -----------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 1,960 $ 2,456
Accrued liabilities--
Payroll and employee benefits 1,891 2,603
Income taxes - 5,063
Other accrued liabilities 3,449 2,423
-------- --------
Total current liabilities 7,300 12,545
TEMPORARY SHAREHOLDERS' INVESTMENT:
Value of shares subject to redemption
agreements; 4,540,000 shares issued
and outstanding in 2001 and 2000 45,400 45,400
PERMANENT SHAREHOLDERS' INVESTMENT:
Common stock 1,693 1,680
Additional paid-in capital 7,001 5,993
Retained earnings 64,621 61,639
Accumulated other comprehensive loss (1,547) (1,574)
Stock conversion program (440) -
-------- --------
71,328 67,738
-------- --------
$124,028 $125,683
======== ========
See accompanying notes to condensed consolidated financial statements.
X-RITE, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands except per share data)
Three Months Ended Nine Months Ended
September 29, September 30, September 29, September 30,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Net sales $21,739 $23,087 $71,528 $75,453
Cost of sales 8,160 8,468 26,238 26,955
------- ------- ------- -------
Gross profit 13,579 14,619 45,290 48,498
Operating expenses:
Selling & marketing 5,871 5,055 17,603 16,077
General & administrative 4,218 4,004 11,358 10,939
Research, development &
engineering 3,827 2,624 11,895 8,072
Restructuring charges 862 - 862 -
------- ------- ------- -------
14,778 11,683 41,718 35,088
------- ------- ------- -------
Operating income (loss) (1,199) 2,936 3,572 13,410
Other income (expense) 245 (59) 1,016 543
------- ------- ------- -------
Income (loss) before
income taxes (954) 2,877 4,588 13,953
Income taxes (1,358) 1,014 - 4,918
------- ------- ------- -------
NET INCOME $ 404 $ 1,863 $ 4,588 $ 9,035
======= ======= ======= =======
Earnings per share:
Basic $.02 $.09 $.21 $.43
==== ==== ==== ====
Diluted $.02 $.09 $.21 $.43
==== ==== ==== ====
Cash dividends per share $.025 $.025 $.075 $.075
===== ===== ===== =====
See accompanying notes to condensed consolidated financial statements.
X-RITE, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Nine Months Ended
September 29, September 30,
2001 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES $ 7,934 $13,842
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments 10,620 6,000
Proceeds from maturities of investments 530 1,446
Purchases of investments (17,525) (4,342)
Capital expenditures (4,000) (2,859)
Acquisitions, net of cash - (4,489)
Purchases of other assets (1,143) (1,206)
Increase in other investments (4,025) -
Increase in cash value of life insurance (3,014) (3,488)
Other investing activities 51 44
------- -------
Net cash and cash equivalents
used for investing activities (18,506) (8,894)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,605) (1,597)
Issuance of common stock 549 413
Repurchase of common stock (54) -
Other financing activities - 1,015
------- -------
Net cash and cash equivalents
used for financing activities (1,110) (169)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 573 (1,565)
------- -------
NET INCREASE (DECREASE)IN CASH
AND CASH EQUIVALENTS (11,109) 3,214
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 18,595 6,898
------- -------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 7,486 $10,112
======= =======
See accompanying notes to condensed consolidated financial statements.
X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by X-Rite Incorporated ("X-Rite" or the "Company"), 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 accounting principles generally accepted
in the United States have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in X-Rite's 2000
annual report on Form 10-K.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the Company as of September 29, 2001 and the results of
its operations and its cash flows for the three and nine month periods ended
September 29, 2001 and September 30, 2000. All such adjustments are of a normal
and recurring nature. Certain prior year information has been reclassified to
conform to the current year presentation.
NOTE 2--SHORT-TERM INVESTMENTS
The Company classifies all of its short-term investments as available for sale
securities. Such short-term investments consist primarily of United States
federal agency securities, state and municipal securities, mutual funds,
corporate bonds and preferred stocks, which are stated at market value with
unrealized gains and losses on such securities reflected net of tax as other
comprehensive income (loss) in permanent shareholders' investment. Realized
gains and losses are included in earnings and are derived using the specific
identification method for determining the cost of the securities. It is the
Company's intent to maintain a liquid portfolio to take advantage of investment
opportunities; therefore, all securities are considered to be available-for-sale
and are classified as current assets.
X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), continued
NOTE 2--SHORT-TERM INVESTMENTS--continued
The carrying value of the Company's investments were as follows (in thousands):
September 29, 2001 December 30, 2000
Market Market
Cost Value Cost Value
------- ------- ------- -------
Investments:
U.S. federal agency obligations $ 3,770 $ 3,794 $ 1,000 $ 979
State and municipal securities 11,080 11,080 7,616 7,615
Mutual funds 1,530 1,054 1,530 1,361
Corporate bonds 1,520 1,528 1,680 1,611
Preferred stocks 1,417 1,250 1,117 903
------- ------- ------- -------
19,317 18,706 12,943 12,469
Unrealized losses (611) - (474) -
------- ------- ------- -------
Totals $18,706 $18,706 $12,469 $12,469
======= ======= ======= =======
Maturities of short-term investments at September 29, 2001 were as follows (in
thousands):
Market
Cost Value
------- -------
Due within one year $ 200 $ 200
Due after one year through five years 2,871 2,891
Due after five years 12,800 12,811
No set maturity 3,446 2,804
------- -------
$19,317 $18,706
======= =======
X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), continued
NOTE 3--INVENTORIES
Inventories consisted of the following (in thousands):
September 30, December 30,
2001 2000
------------ -----------
Raw materials $ 6,157 $ 7,024
Work in process 6,063 4,903
Finished goods 3,501 3,873
------- -------
$15,721 $15,800
======= =======
NOTE 4--INVESTMENTS CARRIED AT COST
Included in other investments at September 29, 2001 and December 30, 2000
respectively, was $8.6 and $4.6 million related to investments made by the
Company's strategic venture capital group, XR Ventures, LLC. The Company funds
acquisitions made by XR Ventures, LLC and in exchange receives its investment
back in full before any distributions are made. Each individual investment
represents less than 20% of the outstanding voting common stock of the
respective investee. Because the Company is unable to exercise significant
influence over the operating and financial policies of each respective investee,
the investments have been recorded at cost. The Company periodically evaluates
the carrying value of each investment to determine whether a decline in fair
value below the respective cost has occurred. If the decline is determined to be
other than temporary, the carrying value is adjusted to the then current fair
value as the new cost basis and a loss is recognized. No such write downs
occurred in 2001 or 2000.
NOTE 5--GOODWILL AND OTHER INTANGIBLE ASSETS
In July 2001 the Financial Accounting Standards Board issued Statement of
Financial Standards No.142 "Goodwill and Other Intangible Assets" ("SFAS 142").
This statement changes the accounting and reporting for goodwill and other
intangible assets. Upon adoption of this statement, goodwill will no longer be
amortized, however, tests for impairment will be performed annually or when a
triggering event occurs. This statement will apply to assets acquired after June
30, 2001, and existing goodwill and other intangible assets upon the adoption of
SFAS 142, in fiscal 2002. Pretax amortization of goodwill for the nine months
ended September 29, 2001, was $.6 million. The Company is evaluating the effect
of SFAS 142 on the consolidated financial statements.
X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), continued
NOTE 6--EARNINGS PER SHARE
Basic earnings per share ("EPS") is computed by dividing net income by the
weighted-average number of common shares outstanding in each quarter. Diluted
EPS is computed by dividing net income by the weighted-average number of common
shares outstanding plus all shares that would have been outstanding if every
potentially dilutive common share had been issued.
The following table reconciles the numerators and denominators used in the
calculations of basic and diluted EPS for each period presented in the
accompanying financial statements:
Three Months Ended Nine Months Ended
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2001 2000 2001 2000
---------- ---------- ---------- ----------
Numerators:
Net income numerators
(in thousands) for both
basic and diluted EPS $404 $1,863 $4,588 $9,035
==== ====== ====== ======
Denominators:
Denominators for basic
EPS; weighted average
common shares
outstanding 21,477,515 21,327,051 21,414,205 21,116,844
Potentially
dilutive shares-
Shares subject to
redemption agreements 357,931 78,009 311,766 31,929
Stock options 73,751 60,583 54,758 50,358
---------- ---------- ---------- ----------
Denominators for
diluted EPS 21,909,197 21,465,643 21,780,729 21,199,131
========== ========== ========== ==========
Certain shares subject to redemption agreements (see Note 8) were considered
dilutive. Certain exercisable stock options were not included in the calculation
of diluted EPS because option prices were greater than the average market prices
for the periods presented. The number of stock options not included in the
calculation of diluted EPS and the range of exercise prices was 1,065,800 and
$10.13 - $19.50 in 2001, and 967,500 and $10.13 - $19.52 in 2000.
X-RITE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), continued
NOTE 7--COMPREHENSIVE INCOME
Comprehensive income consisted of net income, foreign currency translation
adjustments and unrealized losses on short-term investments. Comprehensive
income was $781,000 and $4,615,000 for the three and nine-month periods ended
September 29, 2001; and $1,381,000 and $8,089,000 for the three and nine-month
periods ended September 30, 2000.
NOTE 8--VALUE OF SHARES SUBJECT TO REDEMPTION AGREEMENTS
In January of 1998 the Company entered into agreements with its founding
shareholders for the future repurchase of 4.54 million shares, or 21.3 percent,
of the Company's outstanding stock. 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 average closing price for the ninety trading days
preceding the later death of the founder and his spouse. The discounted price
may not be less than $10 per share or more than $25 per share.
The shares subject to the agreements have been reclassified on the balance sheet
to a temporary equity account. The reclassification of $45,400,000 was
determined by multiplying the applicable shares by the minimum redemption price
of $10, since the average closing price of the Company's common stock, after
applying the 10 percent discount, for the ninety trading days preceding
September 29, 2001 was less than $10.
NOTE 9--RESTRUCTURING CHARGES
In September 2001, the Company recorded a $862,000 pretax charge related to
workforce reductions. This charge has been classified separately as a component
of Operating Earnings under the caption of "Restructuring Charges" and
represents costs associated with non voluntary termination benefits.
Approximately sixty positions will be eliminated worldwide as a result of these
actions. Benefits will begin to be paid in the fourth quarter of 2001 therefore
all of the recorded charges remain in accrued liabilities at September 29, 2001.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following is management's discussion and analysis of certain significant
factors that affected the Company's financial condition and earnings during the
periods included in the condensed consolidated financial statements.
RESULTS OF OPERATIONS
Net Sales:
Net sales declined for both the second quarter and year to date as compared to
2000. Year to date sales were $71.5 million, compared to $75.4 million in 2000,
a decrease of 5.2 percent. Third quarter sales of $21.7 million was a decrease
of 5.8 percent as compared to the third quarter of 2000. The lower sales volumes
are being driven primarily by weakness in the Coatings markets. Softness in both
the retail and automotive lines in North America have caused this unit to
experience a 23.5 percent decrease in sales on a year to date basis as compared
to 2000. Printing and Imaging sales were also sluggish in the third quarter,
decreasing 14.5 percent over 2000. On a year to date basis Printing and Imaging
is down 4.5 percent as compared to 2000. Labsphere sales have remained steady
for the quarter, and have increased 12.1 percent for the year over 2000.
Significant declines in capital goods spending has impacted the Company's North
American sales which are down by 12.0 percent over 2000. Markets outside of
North America continue to grow for the Company but at a slower pace than prior
years. Sales in Europe are up 4.2 percent over 2000, while in the Asia Pacific
region sales have increased 13.5 percent. Sales from the coherix and Optronik
businesses which were acquired in the third quarter of 2000 (see Acquisitions
and Investments) had a nominal impact on sales in 2001.
Cost of Sales and Gross Profit:
Gross profit margins decreased between the periods being reported. In 2001,
gross profit margins were 62.5 percent for the for the quarter and 63.3 percent
year to date, compared to 63.3 percent for the quarter 64.3 percent year to date
in 2000. Decreased sales volumes and changes in product mix were the principal
factors in the declines.
Operating Expenses:
Selling and marketing expenses increased 9.5 percent and 16.1 percent on a year
to date and quarterly basis respectively. These increases were attributable to
expenses incurred in the coherix and Optronik businesses which were acquired
late in the third quarter of 2000, expanded sales and marketing efforts outside
of North America and sales and marketing costs associated with the rollout of
the ShadeVision product. New offices have been opened in China and Italy during
2001.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, continued
RESULTS OF OPERATIONS, continued
General and administrative ("G&A") expenses have increased 3.8 percent on a year
to date basis as compared to 2000. On a quarterly basis, the third quarter of
2001 was 5.3 percent higher than 2000. Expenses associated with the integration
of the coherix, Optronik and XR Ventures units as well as the costs of
establishing new offices were the primary drivers behind the yearly increase.
Research, development and engineering (RD&E) expenses continued to increase
significantly in the third quarter of 2001. On a year to date basis RD&E
expenses were approximately $11.9 million, compared to $8.1 million in 2000, a
47.4 percent increase. The quarter over quarter comparison between 2001 and 2000
had a slightly higher increase of 45.8 percent. The increases can be attributed
to the effect of the Optronik and coherix acquisitions and investments in new
product development.
The Company's new product development efforts have focused recently on shape
measurement and applications for medical, fiber optic and the telecommunicat
ions industries. These efforts have begun to be rewarded with the well received
introduction of X-Rite's ShadeVision dental color matching system and
Labsphere's Vertical Cavity Surface Emitting Laser (VCSEL)Wafer Probe and LED
Wafer Probe Systems. We recognize many needs for new and creative measurement
solutions in these industries and intend to continue to emphasize our
development efforts in this direction.
In September 2001, the Company announced a workforce reduction plan and recorded
a $862,000 pretax charge. This charge has been classified separately as a
component of Operating Earnings under the caption of "Restructuring Charges" and
represents costs associated with non voluntary termination benefits for
approximately sixty positions worldwide. Benefits will begin to be paid in the
fourth quarter of 2001 therefore all of the recorded charges remain in accrued
liabilities at September 29, 2001.
Other Income:
Other income consists of investment income and gains and losses from foreign
exchange.
Income Taxes:
The provision for income taxes reflected effective tax rates of 0.0 and 35.3
percent for 2001 and 2000 respectively, compared to the U.S. statutory rate of
35 percent. The 2001 rate has and will continue to benefit from the execution of
certain international tax strategies.
Net Income:
The Company recorded net income of $404,000 for the three months ended September
29, 2001 compared to $1,863,000 in the same period of 2000. On a per share
basis, third quarter net income, diluted, was $.02 in 2001 compared to $.09 in
2000. For the first nine months of 2001, net income was $4,588,000, or $.21 per
share diluted, compared to $9,035,000, or $.43 per share in 2000. The average
number of common and common equivalent shares outstanding was higher in 2001 due
to an increase in the dilutive effect of shares subject to redemption.
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition, continued
FINANCIAL CONDITION AND LIQUIDITY
Cash flow from operations during the first nine months of 2001 was $7.9 million.
Net income was the largest component of cash provided by operations. Included in
net income are certain recurring accounting charges that do not require the use
of cash. The largest non-cash accounting charges, which totaled $4.6 million,
were depreciation and amortization.
Following short-term investment transactions, the most significant investing
activity during the first nine months of 2001 was the payment of life insurance
premiums in connection with agreements the Company entered into with its
founding shareholders for the future redemption of 4.54 million shares, or 21.3
percent, of the Company's outstanding stock. The stock redemptions will occur
following the later of the death of each founder and his spouse. The cost of the
redemption agreements will be funded by proceeds from life insurance policies
the Company has purchased on the lives of certain of these individuals. Of the
$4.3 million of premiums paid in 2001 approximately $3.0 million represented
cash surrender value and has been recorded as a noncurrent asset on the
Company's balance sheet.
Subsequent to the end of the third quarter 2001, the Company was notified of the
death of one of its founders whose shares are included in the redemption program
noted above. Under the terms of the agreement, the Company will repurchase
1,120,000 shares of stock at 10.00 per share or $11,200,000. The most likely
sources of funding are the Company's cash and short term investment portfolio.
It is expected that this transaction will be completed during the fourth quarter
of 2001.
Capital expenditures in the first nine months of 2001 totaled $4.0 million and
consisted primarily of building improvements, machinery and equipment. The
Company currently anticipates capital expenditures for the remainder of 2001
will be approximately $.45 million.
Dividends of $1.6 million were paid during the first nine months of 2001 which
is equal to an annual rate of 10 cents per share. The Board of Directors intends
to continue paying dividends at this rate in the foreseeable future.
Management believes that X-Rite's current cash and investments, combined with
expected cash flows from future operations and the Company's $20 million
revolving credit agreement, will be sufficient to finance the Company's
operations, life insurance premiums, shareholder redemptions, capital
expenditures and dividends for the foreseeable future. In the event more funds
are required, additional short or long-term borrowing arrangements are the most
likely alternatives for meeting liquidity and capital resource needs.
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition, continued
ACQUISITIONS AND INVESTMENTS
In 2000, the Company purchased substantially all of the assets of Optronik GmbH.
Based in Berlin, Germany, Optronik is a leading provider of color and light
measurement instrumentation and software. Focused primarily on on-line color and
light measurement for web-based processes, its non-contact measurement
technologies are an extension of X-Rite' s current capabilities. The Berlin
location gives X-Rite its first research, development and manufacturing
capabilities in Europe.
Also during 2000, the Company purchased substantially all of the assets of the
HoloVision Products Group of Veridian-ERIM International. These assets were
purchased by a newly formed subsidiary of X-Rite named coherix Corporation
(formerly known as HoloVision Acquisition Company). The products of coherix use
tunable laser technology to accurately map the surface of physical objects for a
variety of industrial applications. Currently the technology is used to provide
non-contact measurement applications requiring a three dimensional perspective.
The measurement of shape complements the traditional X-Rite technologies of
color and light measurement. The ability to provide high resolution, non
contact, spatial measurement will elevate X-Rite's exposure to many dynamic
markets, such as electronic components, micromachines, telecommunications and
biomedicine. coherix is located in Ann Arbor, Michigan, but will also be
conducting research, development and manufacturing at the X-Rite headquarters in
Grandville, Michigan.
XR Ventures, LLC is a strategic venture capital group formed in 2000 and
majority owned by X-Rite. Its mission is to find, direct and manage X-Rite's
holdings in start up companies in high technology fields. The members in the
group include Dr. Peter M. Banks and Mr. James A. Knister. Both have had
extensive careers as executives in technology companies. In addition to their
roles with XR Ventures, both serve on the Board of Directors of X-Rite,
Incorporated. The venture group seeks out, but is not restricted to companies
with technologies that are directly related to current X-Rite technologies, or
technologies that we are interested in pursuing including biosensors, micro
mechanical systems, telecommunication components and information technologies.
At September 29, 2001 and December 30, 2000, the fund held minority positions in
eleven and seven companies, with total investments of approximately $8.6 and
$4.6 million, respectively.
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition, continued
FORWARD-LOOKING STATEMENTS:
This discussion and analysis of financial condition and results of operations,
as well as other sections of our Form 10-Q, contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act, as amended, that are based on
management's beliefs, assumptions, current expectations, estimates and
projections about the industries it serves, the economy, and about the Company
itself. Words such as "anticipates," "believes," "estimates," "expects,"
"likely," "plans," "projects," "should," and variations of such words and
similar expressions are intended to identify such forward looking statements.
These statements are not guarantees of future performance and involve certain
risks, uncertainties, and assumptions that are difficult to predict with regard
to timing, extent, likelihood and degree of occurrence. Therefore, actual
results and outcomes may materially differ from what may be expressed or
forecasted in such forward-looking statements. Furthermore, X-Rite, Incorporated
undertakes no obligation to update, amend or clarify forward looking statements,
whether as a result of new information, future events or otherwise. Forward
looking statements include, but are not limited to statements concerning
liquidity, capital resource needs, tax rates, dividends and potential new
products and markets.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index on Page 17 of this Form 10-Q report.
(b) There were no reports on Form 8-K filed by the Registrant during
the quarter ended September 29, 2001.
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
November 14, 2001 /s/ Richard E. Cook
Richard E. Cook
Chief Executive Officer
November 14, 2001 /s/ Duane F. Kluting
Duane F. Kluting
Vice President and
Chief Financial Officer
EXHIBIT INDEX
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3(a) Restated Articles of Incorporation (filed as exhibit 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 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 Incorporation
amending Article III (filed as exhibit to Form 10-K for the year
ended December 31, 1995 (Commission File No. 0-14800) and
incorporated herein by reference)
3(d) Certificate of Amendment to Restated Articles of Incorporation
amending Article IV (filed as exhibit to Form 10-K for the year
ended January 2, 1999 (Commission File No. 0-14800) and
incorporated herein by reference)
3(e) Bylaws, as amended and restated January 20, 1998 (filed as
exhibit to Form 10-K for the year ended January 3, 1998
(Commission File No. 0-14800) and incorporated herein by
reference)
3(f) Bylaws, as amended and restated November 18, 1999 (filed as
exhibit to Form 10-K for the year ended January 1, 1999
(Commission File No. 0-14800) and incorporated herein by
reference)
4 X-Rite, Incorporated common stock certificate 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)
99 Notice of press release dated January 19, 2001 announcing that X-Rite,
Incorporated will conduct a live audio web cast of its fourth quarter
conference call on January 31, 2001 (filed as exhibit to form 8-K
(Commission File No. 0-14800) and incorporated herein by reference)
EXHIBIT INDEX
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Material contracts or compensation plans with or relating to executive officers,
directors or related parties.
10(k) Employment Agreement dated June 12, 2001 between the registrant
and Michael C. Ferrara (filed as exhibit to Form 10-Q for the
quarter ended June 30, 2001 (Commission File No. 0-14800) and
incorporated herein by reference)
10(l) First Amendment to the X-Rite, Incorporated Amended and Restated
Cash Bonus Conversion Plan dated May 24, 2001 (Commission
File No. 0-14800)
10(m) First Amendment to the Chairman's Agreement dated September 13,2001
entered into between the registrant and Ted Thompson (Commission File
No. 0-14800)
FIRST AMENDMENT TO THE
X-RITE, INCORPORATED
AMENDED AND RESTATED CASH BONUS CONVERSION PLAN
THIS FIRST AMENDMENT TO THE X-RITE, INCORPORATED AMENDED AND RESTATED CASH
BONUS CONVERSION PLAN (the "First Amendment") is made with reference to the
following:
A. The X-Rite, Incorporated Amended and Restated Cash Bonus Conversion
Plan, effective July 19, 2000 (the "Plan") was originally adopted by the
Company's Board of Directors on May 1, 1995, and reflects all amendments through
May 17, 2000.
B. Under Section 9, "Amendments," of the Plan, the Board of Directors may
amend the Plan from time to time in any manner the Board deems advisable,
provided, however, that no such amendment shall adversely affect the rights of
any Participant with respect to shares issued prior to such amendment.
C. The Board of Directors has elected to amend Section 6, "Restrictions" of
the Plan, after having determined that the amendment shall not adversely affect
the rights of any Participant with respect to shares issued prior to this First
Amendment.
D. Under Section 3, "Administration," of the Plan, the Committee is
responsible for operation of the Plan, and its interpretation is final and
binding.
E. The Committee has interpreted Section 5 and Subsection 6(b) of the Plan
as provided herein and the Board of Directors desires to express its concurrence
with such interpretation.
F. Certain capitalized terms not otherwise defined elsewhere in the text of
this First Amendment shall be as defined in the Plan.
NOW, THEREFORE, the Plan is amended as follows:
1. Subsection 6(a) of the Plan shall be deleted and replaced in its
entirety to read as follows:
(a) Prior to the lapse of the restrictions pursuant to Section 6(b)
below: (i) such shares may not be sold, exchanged, pledged, hypothecated,
or otherwise transferred or disposed of by the Participant; and (ii) such
shares shall be forfeited to the Company if the Participant's employment
with the Company is terminated for any reason whatsoever. If, however, the
Participant is terminated by the Company without cause, such Participant
shall be entitled to receive from the Company the amount that the
Participant paid for the forfeited shares, within thirty (30) days of such
forfeiture. For purposes of this Plan, termination "without cause" shall
mean a termination for reasons other than if the Participant: (i) engaged
in conduct involving dishonesty or fraud or is convicted of a crime
involving moral turpitude; (ii) intentionally engaged in conduct which is
materially injurious to the Company, monetarily or otherwise; or (iii)
fails to perform assigned duties (other than any failure resulting from an
illness or other similar incapacity or disability), or to comply with the
policies applicable to all Company employees, after demand for performance
or compliance is made to Participant which specifically identifies the
manner in which it is alleged that Participant has not substantially
performed or complied. The restrictions specified herein shall apply to any
securities distributed as a dividend upon, and in respect of any such
shares that are subject to these restrictions at the time of distribution.
2. Section 5 of the Plan requires that the notice of election to exercise
the option granted in Section 5 must be accompanied by payment of the exercise
price in full plus any withholding and other taxes deemed necessary by the
Company. Such amounts may be paid to the Company either in cash or by surrender
of Stock owned by a Participant valued at the closing sale price reported in the
Nasdaq Stock Market on the day prior to delivery to the Company for payment, or,
if such value is not available, such other estimate of fair market value as the
Committee shall determine.
3.Subsection 6(b) of the Plan has been and shall continue to be interpreted
such that the restrictions referred to in the Plan will lapse within the number
of days so provided in Subsection 6(b) after an option to purchase Stock has
been granted under Section 5 of the Plan. As such, the date on which the
Restricted Stock is deemed to be "issued" in Subsection 6(b) is the same day on
which an option to purchase Stock is granted under Section 5 of the Plan.
4.In all other respects, the Plan shall continue in full force and effect.
CERTIFICATION
-------------
The foregoing Amendment to the Plan was duly adopted by the Board of Directors
of the Company on May 24, 2001.
X-RITE, INCORPORATED
By _________________________
Duane Kluting
Its Secretary
524977v2
FIRST AMENDMENT TO CHAIRMAN'S AGREEMENT
THIS FIRST AMENDMENT TO A CHAIRMAN'S AGREEMENT dated July 16th, 1999
between X-RITE, INCORPORATED and TED THOMPSON is made and entered into,
effective as of the 13th day of September, 2001 (the "Effective Date").
In consideration of the mutual promises contained herein, the parties
agree:
1. Resignation effective as of the Effective Date. The Chairman hereby
resigns as the Chairman of the Board of Directors and as a director of
X-Rite.
2. Director Emeritus effective as of the Effective Date. The Chairman
shall become a Director Emeritus consistent with the Bylaws of X-Rite
in existence on the Effective Date.
3. Compensation. In lieu of Section 7(ii) of the aforementioned
Chairman's Agreement, X-Rite shall provide the benefits to the
Chairman described in the Special Post-Employment Health Plan,
attached to this Agreement and incorporated by this reference. In
addition, the Chairman will be provided an automobile consistent with
X-Rite's executive automobile program for a period of five (5) years
after the Effective Date.
4. Confirmation. Except as expressly provided in this Agreement, the
aforementioned Chairman's Agreement shall continue in full force and
effect in accordance with its terms.
In witness whereof, X-Rite has caused this Agreement to be executed by its
duly authorized corporate officer and Chairman has executed this Agreement as of
the Effective Date recited above.
X-RITE, INCORPORATED
By: __________________________.
Its: _________________________.
______________________________.
Ted Thompson