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X-Rite Reports Fourth Quarter and Fiscal Year 2007 Results

Published on 2008-04-07. Author : SpecialChem

GRAND RAPIDS, Michigan -- X-Rite, Incorporated has announced its financial results for the fourth quarter and year ended December 29, 2007.

Fourth Quarter Highlights:

  • Net sales from continuing operations, excluding the Pantone acquisition, totaled $66.1 million, a 9.6 percent increase over the fourth quarter of 2006
  • Gross margins, adjusted for acquisition and restructuring related expenses and excluding the Pantone acquisition, reached 60.7 percent returning to expected level
  • Operating income, adjusted for acquisition and restructuring related expenses and excluding the Pantone acquisition, for the full year totaled $35.2 million, a 68.4 percent increase from the prior year
  • Amazys integration remains ahead of timetable, with cost savings of $21.1 million, excluding $3.7 million of unfavorable foreign exchange, achieved during the eighteen months of combined operations
  • Completed the acquisition of Pantone, Inc., the leading provider of color communication solutions and standards

The Company reported fourth quarter 2007 net sales from continuing operations of $74.7 million, including $8.5 million from Pantone, compared with $60.4 million in the year-earlier period. Gross margins were 56.7 percent excluding the Pantone acquisition, down from 58.1 percent in the fourth quarter of 2006 as a result of costs related to the Amazys and Pantone acquisitions. Operating income, including approximately 2 months of Pantone's operations, totaled $4.5 million and included $8.3 million in acquisition and restructuring related charges related to the Amazys and Pantone acquisitions ("acquisition and restructuring expenses"). The Company reported a net loss from continuing operations of $20.3 million or $0.70 per basic share, versus net income of $0.5 million or $0.02 per basic share for the same period in 2006.

Adjusted operating income, which excludes acquisition and restructuring expenses, was $12.8 million, and reflects a gross margin of 60.9 percent for the fourth quarter of 2007, versus $11.9 million and 59.4 percent for the same period in 2006. The 2007 number includes Pantone's adjusted operating income, totaling $2.5 million with a gross margin of 62.5 percent. A reconciliation of GAAP earnings from continuing operations to adjusted earnings is included in this release.

"Overall sales in the X-Rite and Pantone core markets were strong in the fourth quarter as we continue to successfully leverage our product lines, stabilize the organization and improve our customer experience," stated Thomas J. Vacchiano, Jr., Chief Executive Officer of X-Rite. "The integration of the sales, engineering and general & administrative functions for the Amazys transaction remains on track and we are excited about the impact that the Pantone acquisition will have on our combined product portfolio and cost synergies."

"Our gross margins returned to more expected levels after we addressed many of the integration and operational issues experienced in the third quarter of 2007," stated Mary E. Chowning, Chief Financial Officer. "Gross margins for the X-Rite stand alone business, adjusted for acquisition and restructuring costs, were 60.7 percent in the fourth quarter of 2007 versus 59.5 percent in the prior period. Gross margins for the Pantone business were 62.5 percent for the approximate two month period since the acquisition."

"Operating expenses in the fourth quarter included several unusual items including $0.7 million for an employment related matter which is under appeal, and $0.5 million of non-cash charges related to our insurance portfolio," continued Chowning. "Additionally, we continued to make significant investments in product development and marketing to enhance our market penetration and support future growth,"

Year-to-Date Results

For the full year 2007, net sales from continuing operations were $248.7 million, versus $167.6 million for the same period of 2006 on a stand-alone basis, or $230.0 million after combining 2006 Amazys results with X-Rite on a pro forma basis. Operating income for the full year totaled $16.6 million and included $21.2 million in acquisition and restructuring related charges. The Company reported a net loss of $12.6 million, or $0.44 per basic share. The net loss from continuing operations was $20.8 million, or $0.72 per basic share.

Adjusted operating income, which excludes acquisition and restructuring expenses, was $37.8 million and reflects a gross margin of 59.9 percent for 2007 versus $20.9 million and a gross margin percent of 59.9 on a pro forma basis for 2006. The 2007 number includes Pantone's adjusted operating income of $2.5 million with a gross margin of 62.5 percent.

Outlook

During fiscal year 2008, the Company expects to realize cost synergies related to the Amazys integration of $1 million to $3 million. Additionally, the Company expects to realize cost synergies related to the Pantone integration of $1.5 million to $2.5 million. As previously announced the Pantone deal provides strategic benefits to the company given its diversified revenue streams, profitability and growth potential.

"We expect full year 2008 revenue growth in the 5 percent to 8 percent range, but with a slow start in the first half of the year. DRUPA, a major printing trade show scheduled for May, along with mid-year new product shipments are expected to support an improving sales ramp beginning in June," stated Vacchiano. "Our revenue outlook balances the benefits of our diversified revenue base from a geographic, market and customer perspective with the uncertainty surrounding the current economic climate."

"We are pleased with our progress in 2007 but recognize that 2008 will be another challenging year," stated Vacchiano. "That said, we continue to be enthusiastic about the opportunities available in the market and remain confident that the strategic decisions we have made to further reinforce our leadership position within our niche and position the Company for long-term success."

Pantone Transaction

The Pantone acquisition was completed on October 24, 2007 and contributed $8.5 million in revenues, and $2.5 million in operating income to X-Rite's fourth quarter and fiscal 2007 results.

About X-Rite:

(NASDAQ: XRIT) X-Rite is the global leader in color-measurement solutions, offering hardware, software, color standards and services for the verification and communication of color data. The Company serves a range of industries, including imaging and media, industrial color and appearance, retail color matching, and medical. X-Rite serves customers in more than 100 countries from its offices in Europe, Asia and the Americas.

EBITDA and Non-GAAP Measures

In addition to the results reported in accordance with generally accepted accounting standards (GAAP) within this release, X-Rite may reference certain information that is considered a non-GAAP financial measure. Management believes these measures are useful and relevant to management and investors in their analysis of the Company's underlying business and operating performance. Management also uses this information for operational planning and decision-making purposes. Non-GAAP financial measures should not be considered a substitute for any GAAP measures. Additionally, non-GAAP measures as presented by X-Rite may not be comparable to similarly titled measures reported by other companies.

One specific non-GAAP measure used by X-Rite is "EBITDA", which is defined as earnings before interest, taxes, depreciation and amortization. In addition to disclosing results that are determined under US GAAP, the Company also discloses non-GAAP results of operations that exclude certain expenses and charges that are directly related to the Amazys acquisition and related integration and restructuring. Specific non-GAAP captions on the operations statements include gross profit, operating expenses (selling and marketing expenses, R&D and engineering, general and administrative), operating income from continuing operations, net income from continuing operations and earnings per share information. The excluded expenses and charges primarily include costs and charges resulting from purchase accounting and integration and restructuring activities associated with the July 5, 2006 acquisition of Amazys Holding AG. Management utilizes the line item non-GAAP operations statement for operational planning and decision-making purposes. A reconciliation of GAAP to non-GAAP financial information discussed in this release is contained in the attached exhibits and on the Company's website at xrite.com.

Forward-Looking Statements and Disclaimer

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in the forward-looking statements, due to a variety of factors, some of which may be beyond the control of the Company. Factors that could cause such differences include the Company's ability to sustain increased sales, improve operations and realize cost savings, competitive and general economic conditions, ability to access into new markets, acceptance of the Company's products and other risks described in the Company's filings with the US Securities & Exchange Commission ("SEC"). The Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or for any other reason.

Source: X-Rite


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