(Source: Business Wire)
X-Rite, Incorporated (NASDAQ: XRIT) today announced its financial
results for the quarter ended October 3, 2009.
Highlights of today's announcement:
Third quarter 2009 net sales of $45.6 million
Continued gains in year-over-year profitability as a result of the
Company's profit improvement plan
Third quarter operating income of $1.6 million and a significant
reduction in the net loss reported in the quarter versus the third
quarter of 2008
Adjusted EBITDA margin in the quarter of 23.3 percent of net
sales, up .5 percentage points from the same period in 2008
Continuing positive cash flows from operations
Strengthened balance sheet
Viptronic campus sale closed with net proceeds of $2.3 million
Debt paid down in the third quarter by $7.7 million and $41.9
million year-to-date
Cash balance of $29.0 million
Exchanged $41.7 million of debt for mandatorily redeemable preferred
stock and warrants
Launched myPANTONE software application for Apple's App Store selling
over 25,000 copies in first 60 days and earning Editor's Choice Award
MatchRite® iVue color matching system achieves
pre-recession bookings at the Ace Hardware Fall Exhibition
The Company reported third quarter 2009 net sales of $45.6 million
compared to $61.3 million in the third quarter of 2008. These results
are in the range of Company expectations given general market conditions
and reflect a decline of 25.6 percent versus prior year (24.8 percent
after adjusting for currency impact). While the year-over-year sales
difference narrowed in the third quarter, particularly in the Standards
segment, soft demand from large printing customers continued to put
pressure on sales results in the Measurement segment. On a year-to-date
basis, net sales were $141.6 million, down 29.4 percent (27.0 percent
after adjusting for the currency impact) for the same period in 2008.
"The third quarter has been an extremely active period for the Company,
contributing many positives for the future of X-Rite," said Thomas J.
Vacchiano Jr., X-Rite's Chief Executive Officer. "Our debt to preferred
stock exchange provides additional operating cushion relative to
covenants in our credit agreements, our sales initiatives are narrowing
the year-over-year revenue difference, our positive operating cash flow
has permitted us to continue an aggressive debt pay down schedule, and
our recently released new products are being well received in the
marketplace."
Supported by the Company's profit improvement actions and narrowing
sales difference from the prior year, the 2009 third quarter net loss
was $9.0 million versus a net loss of $15.5 million in the third quarter
of last year. 2009 operating income was $1.6 million in the quarter, up
from $.3 million in the third quarter of 2008. Adjusted EBITDA in the
third quarter was $10.7 million and 23.3 percent of sales this year
versus $14.0 million and 22.8 percent of sales in the same period last
year.
The Company also reported continuing progress in working capital
management supporting positive operating cash flows in the third quarter
of 2009. The combination of continuing positive cash flows and the sale
of the Viptronic's campus in Brixen contributed to a debt pay down of
$7.7 million in the quarter. Favorably influenced by the mandatorily
redeemable preferred stock and warrant transaction, the Company reduced
its first and second lien debt by $41.7 million to $158.5 million, net
of cash of $29.0 million.
Rajesh K. Shah, X-Rite's Chief Financial Officer, commented, "I recently
joined X-Rite because I was attracted by their leading market position
and attractive business model. The Company has managed well through
these difficult economic conditions and continues to do so. I believe
X-Rite is well positioned for the opportunities we see ahead of us."
X-Rite reported that its new myPANTONE software application has been a
top seller in its category since its launch in September, selling more
than 25,000 copies to date on Apple's App Store. More recently,
myPANTONE won the prestigious Editor's Choice Award from MacLife for its
innovation in the design and creative category. Good news continued for
X-Rite and its MatchRite iVue color matching system at the Ace Hardware
Fall Exhibition, where bookings rebounded to pre-recession levels,
achieving $700,000 to date.
Vacchiano closed by saying, "Market indicators are not yet clear enough
or consistent enough to provide guidance. That said, we do see signs of
improving market conditions in certain geographies and market segments.
New sales and marketing activities, particularly when combined with new
products, appear to be gaining more momentum than six to nine months
ago."
Conference Call
X-Rite invites all interested parties to listen to the live webcast
discussing third quarter 2009 results on Wednesday, November 11, 2009 at
9:00 EST. The call will be co-hosted by Thomas J. Vacchiano, Jr., the
Company's Chief Executive Officer, and Rajesh K. Shah, the Company's
Chief Financial Officer. To access the webcast and conference call
financial presentation, go to www.xrite.com,
click on the About Us tab and select Investor Relations.
If you would like to dial in to the live call, please call 616-803-2203
and the number will be provided. An archived version of this webcast
will be available on X-Rite's Web site shortly after the live broadcast.
About X-Rite
X-Rite is the global leader in color science and technology. The
Company, which now includes design industry color leader Pantone LLC,
develops, manufactures, markets and supports innovative color solutions
through measurement systems, software, color standards and services.
X-Rite's expertise in inspiring, selecting, measuring, formulating,
communicating and matching color helps users get color right the first
time and every time, which translates to better quality and reduced
costs. X-Rite serves a range of industries, including printing,
packaging, photography, graphic design, video, automotive, paints,
plastics, textiles, dental and medical. For further information, please
visit www.xrite.com.
EBITDA and Non-GAAP Measures
In addition to the results reported in accordance with generally
accepted accounting principles (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.
Non-GAAP measures used by X-Rite include adjusted EBITDA and net debt.
Adjusted EBITDA is defined as net income adjusted for interest, taxes,
depreciation, amortization, acquisition restructuring and other related
charges, share based compensation, gains/losses on life insurance,
foreign currency, property tax assessment on the former headquarters,
and sales of assets Net debt is defined as the Company's total
indebtedness less cash. 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 www.xrite.com.
Forward-looking Statements
This release contains forward-looking statements based on current
expectations, estimates, forecasts and projections about our business
and the industry in which we operate and management's beliefs and
assumptions. Forward-looking statements may be identified by the use of
forward-looking terms such as "may," "will," "expects," "believes,"
"anticipates," "plans," "estimates," "projects," "targets," "forecasts,"
"model," and "seeks" or the negative of such terms or other variations
on such terms or comparable terminology. These statements are not
guarantees of future performance and involve risks, uncertainties and
assumptions that could cause actual outcomes and results to differ
materially. These risks and uncertainties include, but are not limited
to, risks associated with our international operations; our substantial
debt level; the possibility that the market for the sale of certain
products and services may not develop as expected; our ability to
protect our intellectual property rights; the existence or enactment of
adverse U.S. and foreign government regulation; the risk that the
development of products and services may not proceed as planned; adverse
general domestic and international economic conditions including
interest rate and currency exchange rate fluctuations; the difficulty of
efficiently managing our cost structure for capital expenditures,
materials and overhead, as well as operating expenses such as wages and
benefits due to the vertical integration of our manufacturing processes;
the impact of competitive products or technologies and competitive
pricing pressures; potential business disruptions; the economic downturn
in the global economy; and other risks that are described from time to
time under the heading "Risk Factors" in our annual and quarterly
reports on Form 10-K and 10-Q filed with the Securities and Exchange
Commission. Readers of this information are cautioned not to place undue
reliance on these forward-looking statements, since, while we believe
the assumptions on which the forward-looking statements are based are
reasonable, there can be no assurance that these forward-looking
statements will prove to be accurate. This cautionary statement is
applicable to all forward-looking statements contained in this release.
We undertake no obligation to update, amend or clarify forward-looking
statements, whether as a result of new information, future events or
otherwise.
EXHIBIT 1
Consolidated Income Statement
(in millions)
Three Months Ended Nine Months Ended
October 3, September 27, October 3, September 27,
2009 2008 2009 2008
Net Sales $ 45.6 $ 61.3 $ 141.6 $ 200.7
Cost of sales 18.6 29.8 58.1 95.5
Gross profit 27.0 31.5 83.5 105.2
Gross margin 59.2 % 51.4 % 58.9 % 52.4 %
Operating expenses:
Selling and marketing 11.9 15.5 38.6 50.5
Research, development and engineering 5.4 6.8 17.0 23.2
General and administrative 7.3 9.0 21.6 27.2
Restructuring and other related charges 0.8 (0.1 ) 4.0 5.6
25.4 31.2 81.2 106.5
Operating income (loss) 1.6 0.3 2.3 (1.3 )
Interest expense (8.5 ) (12.4 ) (25.7 ) (35.6 )
Write-off of deferred financing costs (2.3 ) - (2.3 ) -
Other, net (1.9 ) 0.9 (1.2 ) -
Loss before income taxes (11.1 ) (11.2 ) (26.9 ) (36.9 )
Income taxes (2.1 ) 4.3 (1.6 ) 16.3
Net loss $ (9.0 ) $ (15.5 ) $ (25.3 ) $ (53.2 )
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EXHIBIT 2
Net Sales by Segment
(in millions)
Three Months Ended Nine Months Ended
October 3, September 27, October 3, September 27,
2009 2008 2009 2008
Imaging and Media $ 16.8 $ 25.9 $ 54.4 $ 86.1
Industrial 10.5 12.3 29.6 40.0
Retail 2.8 4.3 10.9 14.3
Color Support Services 5.8 7.2 17.6 22.3
Other 1.5 1.5 4.4 4.5
Total Color Measurement 37.4 51.2 116.9 167.2
Color Standards 8.2 10.1 24.7 33.5
Total $ 45.6 $ 61.3 $ 141.6 $ 200.7
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EXHIBIT 3
Consolidated Balance Sheet
(in millions)
October 3, January 3,
2009 2009
Cash $ 29.0 $ 50.8
Accounts Receivable 27.2 36.9
Inventory 34.1 39.9
Other Current Assets 7.5 15.3
Goodwill and Other Intangible Assets 318.5 331.0
Other Non-Current Assets 63.1 70.6
Total Assets 479.4 544.5
Accounts Payable 7.9 11.6
First and Second Lien Credit Facilities 187.5 270.9
Mandatorily Redeemable Preferred Stock((1)) 27.4 -
Other Liabilities 46.9 52.7
Total Liabilities 269.7 335.2
Shareholders' Investment 209.7 209.3
Total Liabilities and Shareholders' Investment $ 479.4 $ 544.5
Net Debt
First and Second Lien Credit Facilities $ 187.5 $ 270.9
Less: Cash (29.0 ) (50.8 )
Subtotal: Net Debt from credit facilities 158.5 220.1
Mandatorily Redeemable Preferred Stock((1)) 27.4 -
Total Net Debt((1)) $ 185.9 $ 220.1
(1) As of October 3, 2009, includes $14.9 million Discount on Mandatorily Redeemable Preferred
Stock for Warrants - Balance will be accreted over term of Preferred Stock
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EXHIBIT 4
Consolidated Statement of Cash Flows
(in millions)
Nine Months Ended
October 3, September 27,
2009 2008
Net Cash provided by operating activities
Net loss $ (25.3 ) $ (53.2 )
Non-cash adjustments to net loss 37.3 41.7
Changes in operating assets and liabilities, net of effects
from acquisitions: 5.7 25.6
Net cash provided by operating activities 17.7 14.1
Net Cash provided by investing activities 3.1 5.8
Net Cash provided by (used for) financing activities (44.9 ) 9.9
Effect of exchange rate changes on cash 2.3 -
Net increase (decrease) in cash (21.8 ) 29.8
Cash, beginning of period 50.8 20.3
Cash, end of period $ 29.0 $ 50.1
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EXHIBIT 5
Credit Agreement EBITDA
(in millions)
Three Months Ended Nine Months Ended
October 3, September 27, October 3, September 27,
2009 2008 2009 2008
Net Loss $ (9.0 ) $ (15.5 ) $ (25.3 ) $ (53.2 )
EBITDA Adjustments:
Depreciation 1.5 2.3 4.8 5.8
Amortization 5.1 5.3 15.8 15.9
Restructuring and other related costs 1.0 0.9 4.6 7.0
Inventory valuation amortization - 3.8 - 11.5
Share-based compensation ((1)) 1.5 0.8 3.5 2.9
Investment in founders life insurance - 0.5 - 1.5
Net interest expense 10.8 12.4 28.1 35.3
Currency (gain) loss 2.6 (0.7 ) 1.7 0.5
Income taxes (2.1 ) 4.2 (1.6 ) 16.3
(Gain) loss on sale of assets (0.7 ) - (0.5 ) -
Property tax assessment on former headquarters((2)) - - - 0.8
Change in accounting method - - 0.9 -
19.7 29.5 57.3 97.5
EBITDA based on credit agreement 10.7 14.0 32.0 44.3
Changes in credit agreement definition of EBITDA((3)) - - - 0.4
EBITDA based on amended credit agreement $ 10.7 $ 14.0 $ 32.0 $ 44.7
Net Sales 45.6 61.3 141.6 200.7
Adjusted EBITDA Margin(4) 23.3 % 22.8 % 22.6 % 22.3 %
(1) Excludes share-based compensation charged to restructuring, as it is included in the "Restructuring and other related costs" line.
(2) The special property tax assessment relating to certain land improvements on the former headquarters was agreed upon by the lenders as an EBITDA add back.
(3) EBITDA for the first two quarters of 2008 was originally calculated under the terms of the 2007 credit agreements. Under the forbearance and amendment agreements the adjustment for founders life insurance is no longer limited to $1 million per year and mortgage interest is no longer excluded from the interest expense adjustment. These adjustments to the credit agreements resulted in an increase to EBITDA of $0.4 million for the nine months ended September 27, 2008.
(4) Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA into Net Sales. These calculations were performed on the actual results and not rounded figures.
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