6-K 1 w42781e6-k.txt REPORT OF FOREIGN ISSUER 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 6-K Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the period ended September 30, 2000 Xeikon N.V. -------------------------------------------------------- [Translation of registrant's name into English] 72 Vredebaan, 2640 Mortsel, Belgium -------------------------------------------------------- [Address of principal executive offices] [Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.] Form 20-F [x] Form 40-F [ ] [Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.] Yes [x] No [ ] 2 XEIKON N.V. INDEX FORM 6-K

-2- 3 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS XEIKON N.V. CONDENSED CONSOLIDATED BALANCE SHEETS (All amounts in thousands of US dollars)

-3- 4 XEIKON N.V. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (All amounts in thousands of US dollars, except share and per share amounts)

-4- 5 XEIKON N.V. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (All amounts in thousands of US dollars)

-5- 6 XEIKON N.V. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) AND SHAREHOLDERS' EQUITY ( All amounts in Thousands of US Dollars, Except Share and Per Share Amounts)

7 XEIKON N.V. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (ALL AMOUNTS IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS) 1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Xeikon N.V., a Belgian corporation, (the "Company") was established in 1988 and develops, manufactures and markets an innovative digital color printing system specifically designed to meet the speed, quality, reliability, cost, variable content and on demand requirements of the short run color printing market. The condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and include, in the opinion of management, all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of interim period results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The results for the interim periods presented are not necessarily indicative of results to be expected for any future period. These condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report to Shareholders for the fiscal year ended December 31, 1999, filed with the Securities and Exchange Commission on Form 20-F dated June 30, 2000. 2. INVENTORY Inventory is comprised of material, labor and manufacturing overhead, and is stated at the lower of cost (determined on a weighted average basis) or net realizable value. Management performs periodic reviews of inventory and provides reserves for excess and obsolete inventory or disposes of such inventory. Inventory consists of the following:

3. EARNINGS PER SHARE Basic net income/(loss) per share is computed by dividing net income/(loss) by the weighted average number of common shares outstanding during the period. Diluted net income/(loss) per share is computed by dividing net income/(loss) by the weighted average number of common and common equivalent shares outstanding during the period. Given the net loss for the 9 months ended September 30, 2000 there is no dilutive effect on the loss per share. 8 4. INVESTMENT On March 4, 1999, Xeikon entered into a Securities Acquisition Agreement with Varis Corporation, a company engaged in the design, development, manufacture and marketing of controllers and systems for use with electronic print engines. Under the terms of the agreement, Xeikon purchased 1,617.25 shares of Series B Preferred Stock of Varis for $2,500,000. Contemporaneously with its purchase of the Series B Preferred Stock, Xeikon provided a $3,000,000 loan to Varis in return for a promissory note, bearing interest at the Prime Rate plus 2.5%, which is due on March 4, 2001. Xeikon may extend the maturity date of the promissory note for one year in exchange for a warrant to acquire an additional 64.69 shares of Series B Preferred Stock. In view of the uncertain future operations of Varis Corporation, the Company elected to register an impairment of the total investment amounting to $5.3 million valuated at the actual exchange rate. This is separately reflected as a non-recurring charge in the Condensed Consolidated Statement of Operations of the Company. On April 21, 1999, the Company acquired from Bull Europe Centrale et Oriental S.A. ("Bull") 80% of the outstanding shares of Nipson International S.A. ("Nipson International"), a limited liability company organized under French law. The purchase price was 96,000,000 French Francs ("FF") (approximately U.S. $15.8 million, or 71.11 per share.) Until April 21, 2001, Xeikon has the right to acquire the remaining 20% of Nipson International (337,500 shares) from Bull or Dai Nippon Printing, a permitted transferee of 10% of the shares, for a price per share equal to 71.11 FF per share plus interest calculated from April 21, 1999 in an amount equal to EURIBOR (three months) plus 1% through the date of acquisition (the "Purchase Price"). If Xeikon does not exercise its option, the holder(s) of the 20% minority interest may require Xeikon, during the period beginning April 22, 2001 and ending October 21, 2001, to purchase all or part of their shares at a per share price equal to the Purchase Price. The acquisition of Nipson International was accounted for as a purchase. Accordingly, the purchase price was allocated to the net assets acquired based upon their estimated fair market values. The excess purchase price over the estimated fair value of net assets acquired amounted to approximately $7.0 million, which has been accounted for as goodwill and is being amortized over 10 years using the straight line method. The accompanying consolidated statements of income reflect the operating results of Nipson since the acquisition. Pro forma unaudited consolidated operating results of the Company and Nipson for the nine months ended September 30, 1999, assuming the acquisition had been made as of January 1, 1999, are summarized below (in thousands of US dollars except per share amounts):

These pro forma results have been prepared for comparative purposes only and include certain adjustments such as additional depreciation expense as a result of a step-up in the basis of fixed assets, additional amortization expense as a result of goodwill and other intangible assets. They do not purport to be indicative of the results of operations which actually would have resulted had the combination been in effect on January 1, 1999 or of future results of operations of the consolidated entities. In connection with the acquisition from Bull, Xeikon assumed two intercompany loans of Nipson International and its wholly owned subsidiary Nipson Printing Systems, Inc. in the amount of 70,000,000 -8- 9 FF and US $2,321,000, respectively. Xeikon has agreed to cause the first such loan to be repaid in six equal semi-annual installments over a three year period beginning April 21, 2002. This loan bears interest at 1% above the EURIBOR (three months). The second loan will be repaid in two equal annual installments over a two-year period beginning April 21, 2005 and does not bear interest. Bull has agreed to indemnify Xeikon until April 21, 2001 for breaches of customary representations and warranties subject to a maximum indemnification amount of 35,000,000 FF. The Company introduced claims for indemnification towards Bull for approximately 35,000,000 FF (approximately $5 million), under the agreement and has recorded such claim as a receivable. The set up of this receivable was registered against goodwill in the second quarter of 2000. 5. SEGMENT AND GEOGRAPHIC INFORMATION The Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information in the fiscal year ended December 31, 1998. SFAS 131 establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. SFAS 131 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions how to allocate resources and assess performance. The Company's chief decision maker, as defined under SFAS 131, is a combination of the Chief Executive Officer, and the Chief Financial Officer. The Company has viewed its operations and manages its business as principally two segments, the sale of printing systems and options and the sale of consumables, spares, tools and others. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. There are no intersegment sales and transfers. The segment revenues and cost of revenues are as follows :

-9- 10 Gross Margin 24% 37% 29% 37% Revenues by geographic area : -United States $9,988 $20,014 $44,343 $51,342 -Rest of Europe 6,374 8,353 17,525 19,631 -Belgium 1,110 3,006 8,672 15,253 -The Netherlands 6,493 9,768 19,242 24,643 -United Kingdom 3,001 3,055 7,752 7,434 -Germany 9,142 4,659 23,731 12,007 -Other 5,416 4,038 11,979 9,093 -------------------------------------------------------------- $41,524 $52,893 $133,244 $139,403 ============================================================== As a percentage of total revenue : -United States 24.05% 37.84% 33.28% 36.83% -Rest of Europe 15.35% 15.79% 13.15% 14.08% -Belgium 2.67% 5.68% 6.51% 10.94% -The Netherlands 15.64% 18.47% 14.44% 17.68% -United Kingdom 7.23% 5.78% 5.82% 5.33% -Germany 22.02% 8.81% 17.81% 8.61% -Other 13.04% 7.63% 8.99% 6.53% -------------------------------------------------------------- 100.00% 100.00% 100.00% 100.00% ==============================================================

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6. ACQUISITION On June 30, 2000, Xeikon N.V. and Agfa signed a transfer agreement to transfer the digital printing systems ("DPS") business of Agfa to Xeikon N.V.. Agfa received 1,751,741 newly issued restricted shares of Xeikon N.V. and any amount in excess of the share component of the purchase price of the transaction was and will be paid in cash. This transaction resulted in a capital increase of $19,731 and a capital surplus of $6,842, representing the difference between the fair market value of the shares and the par value of the assets. The excess purchase price over the estimated fair value of net assets acquired is accounted for as goodwill and is being amortized over 10 years using the straight line method. The transferred business assets of Agfa include toner, developer and digital front end technology, intellectual property and manufacturing operations - including a manufacturing facility in Heultje, Belgium - research and development staff, as well as the Belgium based marketing and support staff and a sales and service organization based mostly in Europe, North America and Japan. -12- 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain of the statements included in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as elsewhere in this report on Form 6-K are forward-looking statements. These statements involve risks and uncertainties that could cause the actual results to differ materially from those expressed in or implied by such statements. These statements should be read in the context of those factors discussed under the heading "Risk Factors" in the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 1999 filed with the Securities and Exchange Commission on June 30, 2000. OVERVIEW On April 21, 1999, the Company acquired from Bull 80% of the outstanding shares of Nipson International. Nipson International is a manufacturer of digital black and white printers. The purchase price consisted of cash equal to 96,000,000 French Francs ("FF") (approximately US $15.8 million), or 71.11 FF per share. Xeikon has the right (which expires April 21, 2001) to acquire the remaining 20% of Nipson International (337,500 shares) for 71.11 FF per share plus interest calculated from April 21, 1999 at a rate equal to EURIBOR (three months) plus 1% through the date of acquisition (the "Purchase Price"). In addition, the holder(s) of the 20% minority interest may require Xeikon to purchase all or part of their shares at a per share price equal to the Purchase Price during the six month period beginning April 22, 2001. In connection with the acquisition, Xeikon assumed two intercompany loans in the aggregate principal amount of approximately $11.6 million. See "-- Liquidity and Capital Resources." On June 30, 2000, Xeikon N.V. and Agfa signed a transfer agreement to transfer the digital printing systems ("DPS") business of Agfa to Xeikon N.V.. Agfa received 1,751,741 newly issued restricted shares of Xeikon N.V. and any amount in excess of the share component of the purchase price of the transaction was and will be paid in cash. This transaction resulted in a capital increase of $19,731 and a capital surplus of $6,842, representing the difference between the fair market value and the net book value of the assets. The transferred business assets of Agfa include toner, developer and digital front end technology, intellectual property and manufacturing operations - including a manufacturing facility in Heultje, Belgium - research and development staff, as well as the Belgium based marketing and support staff and a sales and service organization based mostly in Europe, North America and Japan. BUSINESS SEGMENTS Xeikon has two reportable business segments : - Color (digital color presses and related consumables, parts and service) - B & W (black and white presses and related consumables, parts and service) EFFECTS OF CURRENCY CHANGES Xeikon's functional currency is the Euro. When translated into US dollars, Xeikon's revenues and net income are negatively affected by the appreciation in the value of the US dollar against the Euro between the third quarter of 1999 and the third quarter of 2000. The US dollar was 16% higher against the Euro for the third quarter of 2000 than for the third quarter of 1999. The Nipson functional currency is the French Franc. Since the French Franc and Euro are linked, the impact of the Dollar versus Euro or French Franc is similar. -13- 14 RESULTS OF OPERATIONS THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2000 COMPARED TO THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 Revenues. Revenues decreased 21% from $52.9 million for the three-month period ended September 30, 1999 to $41.5 million for the three-month period ended September 30, 2000. Revenues were principally affected by (1) the slowdown in equipment revenues, (2) the delay in the first commercial shipments of the new CSP, and (3) the decrease of shipments in the OEM channel. Revenues were also affected by currency changes noted above. Revenues from consumables, spare parts and other decreased 8% from $22.6 million during the third quarter of 1999 to $20.9 million for the third quarter of 2000. Cost of Revenues. Cost of revenues decreased 6% from $33.5 million in the third quarter of 1999 to $31.4 million in the third quarter of 2000. The decrease is the net effect of currency changes noted above, and lower equipment shipments. Cost of revenues includes aggregate royalties of $0.1 million for the three-month period ended September 30, 1999 payable to Xerox. Gross Profit. Gross profit decreased 48% from $19.4 million for the third quarter of 1999 to $10.1 million for the third quarter of 2000. Gross margin for printing systems and options decreased from 39% of revenue in the 1999 quarter to 28% of revenue in the 2000 quarter. Gross margin for the segment consumables, spares tools and other decreased from 33% of revenue in the 1999 quarter to 21% of revenue in the 2000 quarter. The decrease in total gross margin is due to the factors affecting revenues noted above. Research and Development. Research and development expenses increased 40% from $5.2 million in the third quarter of 1999 to $7.3 million in the third quarter of 2000. Research and development expenses was 10% of revenues in the third quarter of 1999 and 18% in the third quarter of 2000. The increased ratio for the 2000 quarter is mainly explained by (1) the lower equipment revenues generated during this quarter, and (2) the incorporation of the digital front end research department as a result of the Agfa DPS acquisition. In relation to the Agfa DPS acquisition a one time charge of acquired in-process research and development was registered during the 2000 quarter. This charge is subject to review after the final valuation of the independent appraiser is received. Selling, General and Administrative. Selling, general and administrative expenses increased to $10.9 million in the third quarter of 2000 from $9.2 million in the 1999 quarter. This increase is mainly due to the incorporation of the Agfa DPS division and the result of the Nipson activities. During the 2000 quarter a non-recurring charge of $5.3 million was recorded related to the Varis investment. Other Income (Expense). Other income was $0.1 million for the third quarter of 1999 and $1.1 million for the third quarter of 2000. Other income consists mainly of exchange rate differences. Income Taxes. The Company had a net income before taxes and minorities of $5.0 million for the three-month period ended September 30, 1999 and a net loss before taxes and minorities of $13.8 million for the three-month period ended September 30, 2000. In the 1999 period the Company set up a provision for income tax in the amount of $2.0 million and reversed the tax provision of $ 1.4 million for the 2000 period. -14- 15 NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2000 COMPARED TO NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 Revenues. Revenues decreased 4% from $139.4 million for the nine-month period ended September 30, 1999 to $133.2 million for the nine-month period ended September 30, 2000. Lower revenues were the result of (1) the decreased deliveries in the OEM channel, (2) the start-up of MAN Roland as a new OEM partner replacing Agfa Gevaert, and (3) the negative evolution of the Euro versus the US Dollar. Revenues from consumables and spare parts increased 25% from $50.6 million in the 1999 period to $63.4 million in the 2000 period, principally because of higher print activity in the market in combination with marketing programs, the increase in the installed base, and the impact of the Black & White market segment. Based on revenues generated in both the 1999 and 2000 periods ended September 30, 1999 and September 30, 2000, Xerox and Agfa were the Company's largest customers. In the 1999 period Xerox represented 30% of the total revenues and Agfa represented 12%. For the 2000 period Xerox accounted for 16% of the total revenues of the Company and Agfa represented 4%. Cost of Revenues. Cost of revenues increased 8% from $87.4 million in the 1999 period to $94.4 million in the 2000 period. The increase is due to the Nipson acquisition noted above, a change in the product mix and the decrease in the OEM channel. Cost of revenues includes aggregate royalties of $0.2 million payable to Xerox for the nine-month period ended September 30, 1999 payable to Xerox. Gross Profit. Gross profit decreased 25% from $52 million for the 1999 period to $38.9 million for the 2000 period. Gross margin detoriorated from 37% of revenue in the 1999 period to 29% of revenue in the 2000 period. The decrease in gross margin was due to the factors affecting revenues and cost of revenues, noted above, the decrease in gross profit for the black and white segment, and the decrease in consumable market prices. Research and Development. Research and development expenses, excluding acquired in-process research and development, increased 37% from $14.4 million in the 1999 period to $19.7 million in the 2000 period. Research and development expenses were 10% of revenues in the 1999 period and 15% of revenues in the 2000 period. Acquired in-process Research and Development represents the value assigned in a purchase business combination to research and development projects of the acquired business that were commenced but not yet completed at the date of acquisition and which, if unsuccessful, have no alternative future use in research and development activities or otherwise. In accordance with SFAS No. 2 "Accounting for Research and Development Costs" amounts assigned to purchased in-process research and development meeting the above criteria must be charged to expense at the date of consummation of the purchase business combination. As a result, a charge of $0.5 million was recorded for the 1999 period and a charge of $1.5 million was recorded for the 2000 period. This allocation was based on preliminary estimates and may be revised at a later date. This item is reflected separately on the Condensed Consolidated Statements of Operations. Selling, General and Administrative. Selling, general and administrative expenses, excluding the non-recurring charges, increased 39% from $22.6 million in the 1999 period to $31.4 million in the 2000 period. The increase is mainly attributable to sales and marketing expenses, especially advertising and several trade shows, and the impact of the Nipson segment. During the 2000 period a non-recurring charge of $5.3 million was recorded related to the Varis investment. Other Income (Expense). Other income (expense) was $0.6 million in the 1999 period and $1.9 million for the 2000 period. The other income for both periods is mainly attributable to the interest income and exchange rate differences. Income Taxes. The Company had an income before taxes of $15.1 million for the nine-month period of 1999 and a loss of $17.1 million for the nine-month period of 2000. In the 1999 period the -15- 16 Company set up a provision for income tax in the amount of $6.3 million and a reversal of the income tax provision of $0.9 million for the nine-month period of 2000. LIQUIDITY AND CAPITAL RESOURCES The Company's operating activities produced cash of $11 million during the nine-month period ended September 30, 2000. At September 30, 2000, the Company had $9.1 million in cash and cash equivalents. The Company uses its credit line facilities in the event that its liquidity needs are not met by its then available cash. At September 30, 2000, the Company's notes payable to banks amounted to $16.5 million. At the moment of filing the unused creditlines amount up to $17 million up from $7 million at the end of the second quarter of 2000. In April 1999, Xeikon used approximately $15.8 million in cash to fund its acquisition of an 80% interest in Nipson International. Xeikon has the option to acquire the remaining 20% of Nipson International (337,500 shares) for a price per share equal to 71.11 FF plus interest calculated from April 21, 1999 in an amount equal to EURIBOR (three months) plus 1% through the date of acquisition (the "Purchase Price"). If Xeikon does not exercise this option, the holder(s) of the 20% minority interest may require Xeikon, during the period beginning April 22, 2001 and ending October 21, 2001, to purchase all or part of their shares at a per share price equal to the Purchase Price. In connection with the Nipson acquisition, Xeikon assumed two intercompany loans of Nipson International and its wholly owned subsidiary Nipson Printing Systems, Inc. from Bull, in the amount of 70,000,000 FF and US $2,321,000, respectively. Xeikon has agreed to cause the first such loan to be repaid in six equal semi-annual installments over a three year period beginning April 21, 2002. This loan will bear interest at 1% above the EURIBOR (three months). The second loan will be repaid in two equal annual installments over a two-year period beginning April 21, 2005 and will not bear interest. In connection with the acquisition of the land for expansion of its manufacturing facilities, the Company assumed a roll over credit facility of Euro 3 million as of July 1, 1999, bearing interest at the Euribor rate plus 0.20%. On July 27, 2000, the Company signed an off balance lease agreement (reviewed by the Company's auditor) for a new plant building in Lier for an amount of $28 million with quarterly payments (from the completion date foreseen as of March 31, 2002) for a 15 year period with a purchase option. The interest rate is EURIBOR 3 months minus a discount (+5.6%). FOREIGN CURRENCY TRANSLATION The functional currency of the Company is the Euro (EUR) and the French Franc, which is directly linked to the Euro, for Nipson, but the Company has elected to present the financial statements in US dollars. The financial statements of the Company are translated from its functional currency, (the Euro), into the reporting currency, the US dollar, utilizing the current rate method. All cumulative translation gains or losses from the translation into the Company's reporting currency are included as a separate component of shareholders' equity in the accompanying balance sheet. The change in the cumulative translation adjustment reflects the strengthening of the US dollar against the EUR between December 31, 1999 and September 30, 2000. The exchange rate was US $1.00 for EUR 0.995 at December 31, 1999 and US $1.00 for EUR 1.14 at September 30, 2000. -16- 17 ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable -17- 18 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 6-K None. -18- 19 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. XEIKON N.V. Date : November 15, 2000 By: /s/ Alfons Buts --------------------------------- Alfons Buts, President and Chief Executive Officer -19-

XEIKON NV 6-K