-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I04/b5RvupKNyRz2je86ll5BX/8hG4PBgCJew8wo9ZJh8ed3LQ8uasdSTAaJOobf yv6tdsjvTjQ1+cHCBPL9OA== 0000950148-96-000816.txt : 19960515 0000950148-96-000816.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950148-96-000816 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960501 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELTRON INTERNATIONAL INC CENTRAL INDEX KEY: 0000915910 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 954302537 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-23342 FILM NUMBER: 96564354 BUSINESS ADDRESS: STREET 1: 41 MORELAND RD CITY: SIMI VALLEY STATE: CA ZIP: 93065 BUSINESS PHONE: 8055791800 8-K/A 1 8-K/A 1 ================================================================================ FORM 8-K-A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) March 1, 1996 ELTRON INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) CALIFORNIA (State or other jurisdiction of incorporation) 0-23342 95-4302537 (Commission File Number) (I.R.S. Employer Identification No.) 41 MORELAND ROAD 93065 SIMI VALLEY, CALIFORNIA (Zip Code) (Address of principal executive offices) (805) 579-1800 (Registrant's telephone number, including area code) N.A. (Former name or former address, if changed since last report) ================================================================================ 2 Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired ----------------------------------------- Please refer to Exhibit 10.2 for financial statements of the business merged with. (b) Pro Forma Financial Information ------------------------------- On March 1, 1996, Eltron International, Inc. ("Eltron") acquired all of the issued and outstanding stock of RJS, Incorporated ("RJS") from the shareholders of RJS in a merger (the "Merger"). RJS is a manufacturer of high-speed bar code printers, verified printing systems and bar code verifiers. The Merger has been accounted for as a pooling of interest for financial reporting purposes. In connection with the Merger, Eltron issued 322,991 shares of its common stock and paid cash consideration of approximately $776,000 in satisfaction of dissenters' rights. The unaudited pro forma financial statements reflect the following: (i) Eltron common shares issued and cash paid in connection with the merger; (ii) the elimination of interest expense and all outstanding borrowings under RJS's line of credit which was paid in full and terminated subsequent to the Merger; (iii) the elimination of sales made between Eltron and RJS; and (iv) the tax effect of the foregoing adjustments. Expenses totaling approximately $450,000 related to the Merger have not been included in the unaudited pro forma financial statements. In the opinion of the Company's management, all adjustments necessary to present fairly such pro forma financial statements have been made based on the terms and structure of the Merger. However, the preparation of pro forma financial information requires many assumptions which may differ from actual operations. These unaudited pro forma financial statements are not necessarily indicative of the actual results which the Company would have reported had the Merger occurred as of January 1, 1993, 1994 or 1995, nor do they purport to indicate the results of future operations. 2 3 Item 7. Financial Statements and Exhibits (b) Pro Forma Financial Information (continued) ------------------------------------------- UNAUDITED PRO FORMA COMBINED BALANCE SHEET DECEMBER 31, 1995(a) (In thousands)
HISTORICAL -------------------------------- ELTRON PRO FORMA INTERNATIONAL, INC. RJS, INC. ADJUSTMENTS PRO FORMA ------------------- --------- ----------- --------- ASSETS: CURRENT ASSETS: Cash .............................. $ 719 $ 10 $(1,469)(b),(c),(f) $ (740) Short term investments ............ 15,552 -- -- 15,552 Accounts receivable, net .......... 7,208 2,189 -- 9,397 Inventories ....................... 9,191 2,316 -- 11,507 Deferred tax assets ............... 573 468 -- 1,041 Other current assets .............. 1,012 135 -- 1,147 ------- ------ ------- ------- Total current assets ............ 34,255 5,118 (1,469) 37,904 Property and equipment, net ......... 3,594 175 -- 3,769 Excess cost over net assets acquired .......................... 1,188 (226) -- 962 Other assets ........................ 324 345 -- 669 ------- ------ ------- ------- $39,361 $5,412 $(1,469) $43,304 ======= ====== ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Borrowings under line of credit ... $ -- $ 768 $ (768)(c) $ -- Accounts payable and accrued liabilities ............. 5,633 2,287 -- 7,920 Accrued taxes payable ............. -- -- 28 (d) 28 ------- ------ ------- ------- Total current liabilities ....... 5,633 3,055 (740) 7,948 LONG TERM OBLIGATION ................ 751 -- -- 751 SHAREHOLDERS' EQUITY: Common stock ...................... 23,816 175 (776)(b) 23,215 Cumulative translation adjustment ...................... (14) -- -- (14) Retained earnings ................. 9,175 2,182 47 (e) 11,404 ------- ------ ------- ------- Total shareholders' equity ........ 32,977 2,357 (729) 34,605 ------- ------ ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................ $39,361 $5,412 $(1,469) $43,304 ======= ====== ======= =======
- ------------ (a) Balance Sheet as of September 30, 1995 has been included for RJS. (b) Adjusted to reflect RJS dissenters' shares purchased by Eltron to connection with in the Merger. (c) Adjusted to eliminate borrowings under RJS's line of credit. (d) Adjusted to record the tax effect of pro forma adjustments. (e) Net impact of pro forma adjustments on retained earnings. (f) Adjusted to reflect interest on paydown of borrowings under RJS's line of credit. 3 4 Item 7. Financial Statements and Exhibits (b) Pro Forma Financial Information (continued) ------------------------------------------- UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995(a) (In thousands except per share amounts)
HISTORICAL -------------------------------- ELTRON INTERNATIONAL PRO FORMA INC. RJS, INC. ADJUSTMENTS PRO FORMA -------------- --------- ----------- --------- Sales ................................ $42,362 $12,764 $(154)(b) $54,972 Cost of Sales ......................... 22,114 8,164 (154)(b) 30,124 ------- ------ ----- ------- Gross Margin .......................... 20,248 4,600 -- 24,848 Operating Expenses: Selling, general and administrative ... 8,472 2,942 -- 11,414 Research and development .............. 2,028 904 -- 2,932 ------- ------ ----- ------- Income from operations ................ 9,748 754 -- 10,502 Other (income) expense, net ........... (365) 107 (75)(c) (333) ------- ------ ----- ------- Income before income taxes ............ 10,113 647 75 10,835 Provision (benefit) for income taxes... 3,744 (103) 28 (e) 3,669 ------- ------ ----- ------- Net income ............................ $ 6,369 $ 750 $ 47 $ 7,166 ======= ====== ===== ======= Pro Forma net income per share ........ $ 0.91 $ 0.98 ======= ======= Shares used in computing net income per share ................. 7,003 323 (d) 7,326 ======= ===== =======
- ------------ (a) Statements of Operations for the year ended September 30, 1995 have been included for RJS. (b) Adjusted to eliminate sales made by Eltron to RJS. (c) Adjusted to reflect paydown of outstanding borrowings under RJS's line of credit. (d) Adjusted to reflect shares issued by Eltron in the Merger. (e) Adjusted to record the tax effect of the foregoing adjustments. 4 5 ITEM 7. Financial Statements and Exhibits (b) Pro Forma Financial Information (continued) ------------------------------------------- UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994(a) (In Thousands Except Per Share Amounts)
HISTORICAL --------------------------- ELTRON INTERNATIONAL PRO FORMA INC. RJS, INC. ADJUSTMENTS PRO FORMA ------------- --------- ----------- --------- Sales ........................................ $17,530 $11,863 $(117)(b) $29,276 Cost of Sales................................. 8,754 7,616 (117)(b) 16,253 ------- ------- ----- ------- Gross Margin.................................. 8,776 4,247 -- 13,023 Operating Expenses: Selling, general and administrative .......... 3,149 2,796 -- 5,945 Research and development...................... 1,172 713 -- 1,885 ------- ------- ----- ------- Income from operations........................ 4,455 738 -- 5,193 Other (income) expense, net................... (80) 54 (79)(c) (105) ------- ------- ----- ------- Income before income taxes.................... 4,535 684 79 5,298 Provision (benefit) for income taxes.......... 1,622 (26) 28 (e) 1,624 ------- ------- ----- ------- Net income.................................... $ 2,913 $ 710 $ 51 $ 3,674 ======= ======= ===== ======= Pro Forma net income per share................ $ 0.50 $ 0.59 ======= ======= Shares used in computing net income per share. 5,866 323 (d) 6,189 ======= ===== =======
- ------------------------- (a) Statements of Operations for the year ended September 30, 1994 have been included for RJS. (b) Adjusted to eliminate sales made by Eltron to RJS. (c) Adjusted to reflect paydown of outstanding borrowings under RJS's line of credit. (d) Adjusted to reflect shares issued by Eltron in the Merger. (e) Adjusted to record the tax effect of the foregoing adjustments. 5 6 ITEM 7. Financial Statements and Exhibits (b) Pro Forma Financial Information (continued) ------------------------------------------- UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1993(a) (In Thousands Except Per Share Amounts)
HISTORICAL ------------------------ ELTRON INTERNATIONAL PRO FORMA INC. RJS, INC. ADJUSTMENTS PRO FORMA ------------- --------- ----------- --------- Sales ............................................ $6,505 $11,541 $ (57((b) $17,989 Cost of Sales .................................... 3,610 7,408 (57)(b) 10,961 ------ ------- ----- ------- Gross Margin ..................................... 2,895 4,133 -- 7,028 Operating Expenses: Selling, general and administrative .............. 1,458 2,667 -- 4,125 Research and development ......................... 434 1,158 -- 1,592 ------ ------- ----- ------- Income from operations ........................... 1,003 308 -- 1,311 Other (income) expense, net....................... 131 107 (119)(c) 119 ------ ------- ----- ------- Income before income taxes ....................... 872 201 119 1,192 Provision for income taxes ....................... 57 16 8 (e) 81 ------ ------- ----- ------- Net income ....................................... $ 815 $ 185 $ 111 $ 1,111 ====== ======= ===== ======= Pro Forma net income per share ................... $ 0.26 $ 0.32 ====== ======= Shares used in computing net income per share .... 3,196 323 (d) 3,519 ====== ===== =======
- ------------ (a) Statements of Operations for the year ended September 30, 1993 have been included for RJS. (b) Adjusted to eliminate sales made by Eltron to RJS. (c) Adjusted to eliminate interest expense on borrowings under RJS's line of credit. (d) Adjusted to reflect shares issued by Eltron in the Merger. (e) Adjusted to record the tax effect of the foregoing adjustments. 6 7 ITEM 7. Financial Statements and Exhibits (c) Exhibits: -------- 10.2 RJS, Incorporated and Subsidiary, Consolidated Financial Statements for the Years Ended September 30, 1995 and 1994. 10.3 Amendment to Merger and Plan of Reorganization dated March, 1996 by and among Eltron International, Inc., Eltron Acquisition Corp., RJS, Incorporated, and the shareholders of RJS. 7 8 SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ELTRON INTERNATIONAL, INC. Date: May 14, 1996 By:_________________________________ Daniel C. Toomey, Jr. Chief Financial Officer 8 9 EXHIBIT INDEX
Exhibit Page No. - ------- -------- 10.2 RJS, Incorporated and Subsidiary, Consolidated Financial Statements for the Years Ended September 30, 1995 and 1994. 10.3 Amendment to Merger and Plan of Reorganization dated March, 1996 by and among Eltron International, Inc., Eltron Acquisition Corp., RJS, Incorporated, and the shareholders of RJS.
9 EX-10.2 2 EXHIBIT 10.2 1 EXHIBIT 10.2 [DELOITTE & TOUCHE LLP LOGO] - ------------------------------------------------------------------------------- RJS, INCORPORATED AND SUBSIDIARY Consolidated Financial Statements for the Years Ended September 30, 1995 and 1994 and Independent Auditors' Report - ------------------------------------------------------------------------------ [DELOITTE TOUCHE TOHMATSU INTERNATIONAL LOGO] 2 [DELOITTE & TOUCHE LLP LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Board of Directors of RJS, Incorporated: We have audited the accompanying consolidated balance sheets of RJS, Incorporated and subsidiary (the "Company") as of September 30, 1995 and 1994, and the related consolidated statements of income and retained earnings and cash flows for the years then ended. 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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 1995 and 1994, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP November 22, 1995 [DELOITTE TOUCHE TOHMATSU INTERNATIONAL LOGO] 3 RJS, INCORPORATED
CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1995 AND 1994 - -------------------------------------------------------------------------------------------------- ASSETS 1995 1994 CURRENT ASSETS: Cash ............................................................... $ 10,000 $ 757,000 Accounts receivable - trade, less allowance or doubtful accounts of $153,000 and $172,000 in 1995 and 1994, respectively (Note 4)..... 2,189,000 1,854,000 Inventories (Notes 1, 2 and 4)...................................... 2,316,000 1,878,000 Deferred income tax assets (Notes 1 and 7).......................... 468,000 330,000 Prepaid expenses and other current assets........................... 118,000 70,000 Current portion of notes receivable from shareholders (Note 3)...... 17,000 ---------- ---------- Total current assets.......................................... 5,118,000 4,889,000 ---------- ---------- PROPERTY AND EQUIPMENT (Notes 1 and 4): Machinery, equipment, and furniture and fixtures.................... 482,000 355,000 Less accumulated depreciation....................................... 307,000 239,000 ---------- ---------- Property and equipment, net................................... 175,000 116,000 ---------- ---------- NOTES RECEIVABLE FROM SHAREHOLDERS (Note 3)........................... 246,000 ---------- OTHER ASSETS.......................................................... 99,000 49,000 ---------- ---------- TOTAL................................................................. $5,638,000 $5,054,000 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994 CURRENT LIABILITIES: Line of credit (Note 4)............................................. $ 768,000 $1,000,000 Accounts payable.................................................... 1,706,000 1,442,000 Accrued expenses and other current liabilities...................... 366,000 437,000 Deferred service contract revenue (Note 1).......................... 215,000 199,000 ---------- ---------- Total current liabilities..................................... 3,055,000 3,078,000 ---------- ---------- EXCESS OF FAIR VALUE OVER COST OF NET ASSETS ACQUIRED, Net (Note 1).............................................. 226,000 369,000 ---------- ---------- SHAREHOLDERS' EQUITY (Note 6): Preferred stock - Class A, no par value; 10,000,000 shares authorized; none issued or outstanding Common stock - Class A, no par value; 10,000,000 shares authorized; 4,570,000 shares issued and outstanding at September 30, 1995 and 1994........................ 175,000 175,000 Common stock - Class B, no par value; 10,000,000 shares authorized; none issued or outstanding Retained Earnings................................................... 2,182,000 1,432,000 ---------- ---------- Total shareholders' equity.................................... 2,357,000 1,607,000 ---------- ---------- TOTAL................................................................. $5,638,000 $5,054,000 ========== ==========
See accompanying notes to consolidated financial statements. -13- 4 RJS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS YEARS ENDED SEPTEMBER 30, 1995 AND 1994 - ----------------------------------------------------------------------------------- 1995 1994 ----------- ----------- REVENUES (Note 1): Product sales and service contract revenue ........ $12,764,000 $11,463,000 License fees ...................................... 400,000 ----------- ----------- Total revenues .............................. 12,764,000 11,863,000 COST OF SALES ....................................... 8,164,000 7,616,000 ----------- ----------- GROSS PROFIT ........................................ 4,600,000 4,247,000 SELLING EXPENSES .................................... 1,719,000 1,614,000 GENERAL AND ADMINISTRATIVE EXPENSES ................. 1,223,000 1,182,000 RESEARCH AND DEVELOPMENT EXPENSES (Note 1) .......... 904,000 713,000 ----------- ----------- INCOME FROM OPERATIONS .............................. 754,000 738,000 INTEREST EXPENSE .................................... 103,000 115,000 OTHER (EXPENSE) INCOME, Net (Note 1) ................ (4,000) 61,000 ----------- ----------- INCOME BEFORE BENEFIT FOR INCOME TAXES .............. 647,000 684,000 BENEFIT FOR INCOME TAXES (Notes 1 and 6) ............ 103,000 26,000 ----------- ----------- NET INCOME .......................................... 750,000 710,000 RETAINED EARNINGS, BEGINNING OF YEAR ................ 1,432,000 722,000 ----------- ----------- RETAINED EARNINGS, END OF YEAR ...................... $ 2,182,000 $ 1,432,000 =========== ===========
See accompanying notes to consolidated financial statements. -3- 5 RJS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30, 1995 AND 1994 - ------------------------------------------------------------------------------- 1995 1994 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income........................................... $ 750,000 $ 710,000 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization....................... 85,000 74,000 Amortization of excess of fair value over cost of net assets acquired................................ (143,000) (142,000) Deferred income taxes............................... (138,000) (130,000) Changes in operating assets and liabilities: Accounts receivable - trade........................ (335,000) 63,000 Inventories........................................ (438,000) (313,000) Prepaid expenses and other current assets.......... (48,000) (22,000) Accounts payable................................... 264,000 375,000 Accrued expenses and other current liabilities..... (71,000) 116,000 Deferred service contract revenue.................. 16,000 23,000 --------- --------- Net cash (used in) provided by operating activities...................................... (58,000) 754,000 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment................... (127,000) (46,000) Other assets......................................... (67,000) (24,000) Loans to shareholders................................ (263,000) --------- -------- Net cash used in investing activities............ (457,000) (70,000) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net repayment of line of credit...................... (232,000) (100,000) Repayment of long-term debt.......................... (100,000) Issuance of common stock............................. 7,000 --------- --------- Net cash used in financing activities............ (232,000) (193,000) --------- --------- (DECREASE) INCREASE IN CASH........................... (747,000) 491,000 CASH, BEGINNING OF YEAR............................... 757,000 266,000 --------- --------- CASH, END OF YEAR..................................... $ 10,000 $ 757,000 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during year for: Interest.......................................... $ 103,000 $ 154,000 Income taxes...................................... $ 104,000 $ 2,000
See accompanying notes to consolidated financial statements. - 4 - 6 RJS, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 1995 AND 1994 - ------------------------------------------------------------------------------- 1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General - RJS, Incorporated ("RJS") and its wholly owned subsidiary, RJS International, GmbH ("RJS-GMBH"), a West German corporation (collectively, the "Company"), are engaged in the design, development, production and distribution of electronic instruments related to the scanning and printing of bar code labels used in the identification of industrial and consumer products. The Company sells its products throughout the United States and Canada, Europe, South America, Australia and the Pacific Basin. The reporting entity RJS changed its name during the year from IDM Technologies, Inc. to RJS, Incorporated. Consolidation - The accompanying consolidated financial statements include the accounts of RJS and RJS-GMBH. All significant intercompany balances and transactions have been eliminated in consolidation. Fiscal Year - The Company's fiscal year is the 52- or 53-week period ending the Sunday nearest to September 30. References to the years ended September 30, 1995 and 1994 in these consolidated financial statements are to the 52 weeks ended October 1, 1995 and October 2, 1994, respectively. Revenue Recognition - The Company recognizes revenue as products are shipped, net of estimated returns. The Company offers its customers extended service contracts for the products it sells. Deferred service contract revenue is recognized over the life of the service contract on a straight-line basis, with service costs recognized as incurred. Research and Development - Research and development costs are expensed as incurred and consist of engineering expenses related to the development of new products and the refinement and modification of existing products. During 1994, the Company granted a perpetual, nonexclusive license for a limited portion of the laser printer technology it previously developed to an unrelated entity. Other Income (Expense) - Other income consists principally of amortization of the excess of fair value over cost of net assets acquired. Other expense consists principally of foreign currency transaction losses, which were $157,000 and $62,000 in 1995 and 1994, respectively. Inventories - Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. Property and Equipment - Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of their useful lives or the related lease terms. Useful lives range from three to five years. - 5 - 7 Excess of Fair Value over Cost of Net Assets Acquired--The excess of fair value over cost of net assets acquired (relating to the acquisition of RJS and RJS-GMBH during 1987) is being amortized to income over ten years. The amount of such amortization, recorded as other income, was $143,000 and $142,000 during 1995 and 1994, respectively. Foreign Currency Translation--The financial statements of RJS-GMBH are translated into U.S. dollars in accordance with Statement of Financial Accounting Standards No. 52. Assets and liabilities are translated using the exchange rate at the balance sheet date, and revenues, expenses, gains and losses are translated using an average exchange rate for the year. The foreign currency translation adjustment was immaterial during 1995 and 1994. Income Taxes--Deferred income taxes reflect the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Temporary differences result primarily from net operating loss carryforwards, general business tax credits and inventory reserves. The Company records a valuation allowance for deferred income tax assets when, based on management's best estimate of taxable income in the foreseeable future, it is more likely than not that some portion of the deferred income tax assets may not be realized. Concentration of Credit Risk--Financial instruments which potentially subject the Company to concentrations of credit risk consist of accounts receivable. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Company's customer base and their geographic dispersion. The Company grants uncollateralized credit to domestic and international customers. Reclassifications--Certain reclassifications have been made to the 1994 amounts to conform to the 1995 presentation. 2. INVENTORIES Inventories consist of the following: 1995 1994 Raw materials $1,244,000 $1,058,000 Work-in-process 112,000 202,000 Finished goods 960,000 618,000 ---------- ---------- Total inventories $2,316,000 $1,878,000 ========== ========== 3. NOTES RECEIVABLE FROM SHAREHOLDERS Notes receivable from shareholders consist of five-year notes that accrue interest at 6% per annum. Monthly payments of principal and interest, computed as if the notes were to be fully amortized over fifteen years, are due through December 1999. The remaining balance is due in January 2000. - 6 - 8 4. LINE OF CREDIT RJS has a line-of-credit facility with a bank under which $2,000,000 is available for working capital advances and $450,000 is available for letters of credit issuance. Aggregate borrowings under the facility are limited to the lesser of $2,000,000 or the sum of (1) 80% of eligible accounts receivable, as defined, plus (2) the lesser of 15% of eligible inventories, as defined, or $250,000. The credit facility, which expires on March 1, 1996, is collateralized by accounts receivable, inventories and property and equipment and is guaranteed by the principal shareholders of RJS. Advances under the credit facility bear interest at the bank's prime rate (8.75% at September 30, 1995) plus .50%. At September 30, 1995, RJS had $798,000 in available credit under this arrangement. Loan covenants in connection with the line of credit include the maintenance of certain financial ratios, limitations on additional indebtedness, and certain other restrictions. 5. COMMITMENTS The Company leases its facilities under a month-to-month lease. Rent expense charged to operations during each of 1995 and 1994 was $122,000. 6. STOCK OPTION PLAN The Company has a nonqualified stock option plan under which 225,000 shares of Class A common stock have been reserved for issuance to certain key employees. Stock options may be granted at prices not less than 100% of the fair market value at the date of the grant. All options expire at periods determined by the Board of Directors. Stock options for 6,333 shares were exercised during 1994 for a total of $7,000. Stock options for 6,333 shares expired during 1994. There were no outstanding options at September 30, 1995. 7. INCOME TAXES The (benefit) provision for income taxes consists of the following: 1995 1994 Current: Federal, net of effect of net operating loss carryforwards of $180,000 and $289,000 in 1995 and 1994, respectively $ 3,000 $ 10,000 State 32,000 54,000 Foreign 40,000 --------- --------- Total current 35,000 104,000 Deferred (138,000) (130,000) --------- --------- Total $(103,000) $ (26,000) ========= ========= -7- 9 The Company has recorded a valuation allowance to reduce net deferred income tax assets to the amount expected to be realized, which, at September 30, 1995 and 1994, consisted of the following: 1995 1994 Deferred income tax assets $1,354,000 $1,378,000 Deferred income tax liabilities (35,000) (42,000) ---------- ---------- Total 1,319,000 1,336,000 Less valuation allowance 851,000 1,006,000 ---------- ---------- Net deferred income tax assets $ 468,000 $ 330,000 ========== ========== At September 30, 1995 and 1994, the Company had net operating loss carryforwards of $1,397,000 and $1,781,000, respectively, available to reduce future federal taxable income. These carryforwards expire through 2002. The investment tax, research and other credits expire between 1999 and 2001. In addition, at September 30, 1995 and 1994, RJS-GMBH had in excess of $1,500,000 of tax loss carryforwards available to offset taxable income reportable in Germany, if any, earned by RJS-GMBH in the future. A valuation allowance has been recorded for the full amount of such net operating loss carryforwards. The provision for income taxes differs from that which would result from applying the federal statutory tax rates to pretax income due principally to state income taxes, foreign losses, amortization of the excess of fair value over cost of net assets acquired, changes in the valuation allowance, research credits and officers' life insurance. 8. EMPLOYEE BENEFIT PLAN The Company has a 401(k) savings and profit sharing plan that is available to substantially all of its employees. Under the plan, employees can make voluntary contributions not to exceed the lesser of an amount equal to 15% of their compensation or limits established by the Internal Revenue Code. The Company, at its discretion, matches a portion of the employees' annual contributions. Company contributions during each of 1995 and 1994 were $18,000. * * * * * * - 8 - EX-10.3 3 EXHIBIT 10.3 1 EXHIBIT 10.3 FIRST AMENDMENT TO MERGER AGREEMENT AND PLAN OF REORGANIZATION This First Amendment (the "Amendment") to the Merger Agreement and Plan of Reorganization dated as of February 29, 1996 (the "Merger Agreement"), is entered into as of March 1, 1996, by and among ELTRON INTERNATIONAL, INC., a California corporation ("ELTRON"), RJS, INC., a California corporation ("RJS"), and the RJS Shareholder Representatives acting on behalf of the RJS Shareholders. Capitalized terms not otherwise defined herein shall have the same meanings given them in the Merger Agreement. AGREEMENT --------- In consideration of the promises made herein and for other good and valuable consideration, the parties hereto hereby amend the Merger Agreement as follows: 1. The first sentence of Section 11.1 of the Merger Agreement is hereby deleted. The following is substituted in its place: "The representations, warranties, covenants and agreements of RJS and each Selling Shareholder contained herein and the indemnification by RJS and the Selling Shareholders under Section 11.2A with respect thereto, shall survive the Effective Time until the Escrow Termination Date, except for Section 3.15 (Tax Matters) which shall survive the Effective Time for five years." 2. Section 11.2B of the Merger Agreement, line 2 which reads as follows: "manner described in, this Article XI, for a period of two years from the Effective Time," is hereby deleted. The following is substituted in its place: "manner described in, this Article XI, until the Escrow Termination Date," 3. In all other respects, the Merger Agreement shall be unmodified and shall remain in full force and effect. 4. This Amendment may be executed in counterparts. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date and year first above written. ELTRON INTERNATIONAL, INC. By: /s/ Donald K. Skinner ----------------------------- Name: Donald K. Skinner Its: Chairman and Chief Executive Officer [Signatures continued on next page] 2 RJS, INC. By: Donald K. Skinner ------------------------------ Name: Donald K. Skinner Its: Chief Executive Officer RJS SHAREHOLDER REPRESENTATIVES: By: _____________________________ A. Tee Migliori By: _____________________________ Richard E. Mahmarian By: _____________________________ Lee D. Williams 2 -----END PRIVACY-ENHANCED MESSAGE-----