X-Rite, Incorporated (NASDAQ:XRIT) today announced its financial
results for the third quarter ended October 1, 2011.
Highlights for the quarter:
- Net sales of $57.0 million, up 2.8
percent from the third quarter 2010, and up 9.4 percent on a year
to date basis
- Operating income of $8.4 million, up
$1.5 million or 20.5 percent from the third quarter 2010, and up
40.7 percent on a year to date basis
- Net income of $7.0 million, up $7.1
million from the third quarter 2010
- Fully diluted earnings of $0.08 per
share, up from $0.00 per share in the third quarter 2010
- Adjusted EBITDA of $14.9 million, up
$1.7 million from the third quarter 2010. Adjusted EBITDA was 26.1
percent of net sales for the third quarter of 2011 compared to 24.0
percent of net sales for the third quarter 2010
- Debt re-payments of $11.8 million in
the third quarter 2011
The Company reported a net sales increase of $1.6 million, or
2.8 percent, for the third quarter 2011 as compared to the third
quarter 2010. Industrial, Standards and Support Services product
lines again led the quarter with 10.9, 7.9 and 13.4 percent growth
over the prior year quarter results, respectively. The strong
growth by the Industrial and Standards product lines continues to
be supported by the success of the Company’s multi-angle product
portfolio and recently released Pantone FASHION + HOME system
extension. On a regional basis, after adjusting for foreign
exchange, the strongest operational growth in the quarter was in
Asia Pacific. Excluding the impact of positive changes in foreign
exchange rates due to a weakening U.S. Dollar, net sales decreased
by 1.1 percent on a quarter over quarter basis. This marginal
decline was largely due to the weakening offset printing market
coupled with the continuing economic uncertainties in the global
economy.
Thomas J. Vacchiano Jr., the Company’s Chief Executive Officer,
stated, “While the Company’s sales in the third quarter were
tempered by market and economic uncertainties we are pleased to
report the continued growth performance of our Asia Pacific region
which reflects the benefit of our specific investments over the
past year.”
The Company’s operating expenses were slightly reduced from the
prior year’s third quarter with the costs of strategic investments
offset by continued cost management actions and reductions in
variable compensation expense. Operating income as a percent of net
sales improved to 14.7 percent for the third quarter 2011, compared
to 12.5 percent for the third quarter 2010.
Net income for the third quarter 2011 increased by $7.1 million
to $7.0 million from $(0.1) million for the third quarter 2010. The
improved net income reflects the Company’s positive operating
performance and substantially reduced interest expense from the
completion of the March 2011 debt refinancing. Third quarter 2011
fully diluted earnings improved to $0.08 per share from $0.00 per
share for the third quarter 2010.
For the nine months ended October 1, 2011, the Company generated
$25.7 million of cash flows before financing activities. With cash
flow provided by operations in the quarter the Company made $11.8
million in debt re-payments. Rajesh K. Shah, X-Rite’s Chief
Financial Officer, commented, “We are pleased that we are able to
successfully navigate these volatile economic times, delivering
increased earnings, improved operating income margins and
aggressively executing our plans to deleverage the Company."
Vacchiano closed by saying, “It is gratifying that even with
uncertain market and economic conditions X-Rite is still able to
drive strong year over year earnings growth through the leverage
from our strategic initiatives and unique market position. As we
look forward into the fourth quarter we expect to continue to
generate single digit sales growth compared to the fourth quarter
of 2010.”
Conference Call
X-Rite invites all interested parties to listen to the live
webcast discussing the third quarter results on Thursday, November
3, 2011 at 11:00 a.m. EDT. 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. The conference call
will be webcast and investors will be able to access the conference
call and slide presentation on the Investor Relations page of
X-Rite’s website at http://ir.xrite.com or by phone at 877-407-8033
for domestic callers and 201-689-8033 for international callers. No
ID is required. An archived version of this webcast will be
available on X-Rite’s website shortly after the live broadcast.
About X-Rite
X-Rite is a global leader in color science and technology. The
Company, which 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.
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,” “should,” “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;
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 after the date
of this release, whether as a result of new information, future
events or otherwise.
X-Rite, Incorporated Consolidated Income
Statement (unaudited) (in millions)
Three Months
Ended Nine Months Ended October 1, October
2, October 1, October 2, 2011 2010
2011 2010 Net Sales $ 57.0 $ 55.4 $
179.1 $ 163.7 Cost of sales 23.1 22.7
72.7 65.7
Gross
profit 33.9 32.7 106.4 98.0 Gross margin 59.5 % 59.1 % 59.4 %
59.9 % Operating expenses: Selling and marketing 14.4 14.3
44.4 41.6 Research, development and engineering 5.7 6.1 18.0 17.6
General and administrative 5.4 5.4 15.8 16.8 Restructuring and
other related charges - - -
2.0 25.5 25.8
78.2 78.0
Operating income 8.4
6.9 28.2 20.0 Interest expense (2.3 ) (6.7 ) (10.3 ) (22.1 )
Loss on redemption of preferred shares and debt refinancing costs -
(1.1 ) (13.8 ) (1.1 ) Other income (loss) 2.0
(1.2 ) 1.1 1.3
Income (loss)
before income taxes 8.1 (2.1 ) 5.2 (1.9 ) Income tax
(benefit) expense 1.1 (2.0 ) 0.7
(1.6 )
Net income (loss) $ 7.0 $ (0.1 )
$ 4.5 $ (0.3 ) Earnings (Loss) Per Share Basic and
diluted $ 0.08 $ (0.00 ) $ 0.05 $ (0.00 )
X-Rite,
Incorporated Net Sales by Product Line
(unaudited) (in millions)
Three Months Ended Nine
Months Ended October 1, October 2, October
1, October 2, 2011 2010 2011
2010 Imaging and Media $ 21.7 $ 23.0 $ 67.7 $ 64.9
Industrial 11.6 10.5 38.6 33.5 Standards 11.8 10.9 35.8 31.5
Support Services 7.2 6.4 22.0 19.4 Retail 3.5 3.5 11.5 10.8 Other
1.2 1.1 3.5 3.6
Total $ 57.0 $
55.4 $ 179.1 $ 163.7
X-Rite, Incorporated
Consolidated Condensed Balance Sheet (unaudited)
(in millions) October 1,
January 1, 2011 2011 Cash $ 7.7 $ 11.7
Accounts Receivable 33.9 31.8 Inventory 28.4 27.7 Other Current
Assets 4.8 5.7
Total Current Assets 74.8 76.9
Goodwill and Other Intangible Assets 294.0 302.8 Other Non-Current
Assets 66.3 59.4
Total Assets 435.1
439.1 Current Maturities on Long-Term Debt 9.6 1.4
Accounts Payable and Other Accrued Liabilities 33.6
33.5
Total Current Liabilities 43.2 34.9 Long-Term Debt
150.2 135.2 Mandatorily Redeemable Preferred Stock(1) - 36.4 Other
Liabilities 13.9 11.1
Total Liabilities 207.3
217.6
Shareholders' Investment 227.8 221.5
Total Liabilities and Shareholders' Investment $
435.1 $ 439.1
(1)
Net of $10.6 million Discount on Mandatorily Redeemable Preferred
Stock as of January 1, 2011
X-Rite, Incorporated
Consolidated Statement of Cash Flows (unaudited)
(in millions)
Nine Months Ended October 1, October 2,
2011 2010 Net income (loss) $ 4.5 $ (0.3 )
Non-cash adjustments to net income (loss): Depreciation 4.9 4.6
Amortization 12.4 12.2 Non-cash interest expense 3.2 9.4 Loss on
redemption of preferred shares and debt refinancing costs 13.8 1.1
Other (0.6 ) 4.1 Sub-total non-cash
adjustments 33.7 31.4 Changes in operating assets and liabilities
(3.4 ) 0.2
Net Cash provided by operating
activities 34.8 31.3
Net Cash used for investing
activities (9.1 ) (7.0 )
Cash flows
before financing activities 25.7 24.3 Proceeds from
long-term debt 185.2 16.5 Payments of long-term debt (162.3 ) (52.7
) Redemption of preferred shares (47.0 ) - Refinancing related
charges (5.6 ) - Other 0.2 (0.2 )
Net Cash
used for financing activities (29.5 ) (36.4 ) Effect of
exchange rate changes on cash (0.2 ) (2.2 )
Net decrease in cash (4.0 ) (14.3 )
Cash, beginning of
period 11.7 29.1
Cash, end of
period $ 7.7 $ 14.8
EBITDA and Non-GAAP
Financial Measures As required by the Securities and Exchange
Commission regulation G, the following tables contain information
regarding the non-GAAP adjustments used by the Company in the
presentation of its financial results:
X-Rite, Incorporated Reconciliation of
Reported Financial Results to Adjusted EBITDA as defined by Credit
Agreements* (unaudited) (in millions)
Three Months Ended Nine Months Ended October
1, October 2, October 1, October 2,
2011 2010 **
2011 2010 **
Net
income (loss) $ 7.0 $ (0.1 )
$ 4.5 $ (0.3 ) EBITDA
Adjustments: Depreciation 1.6 1.5 4.9 4.6 Amortization 4.2 4.1
12.4 12.2 Restructuring and other related costs - - - 2.0
Share-based compensation 0.6 0.7 1.7 2.4 Net interest expense and
debt refinancing and related charges 2.3 7.8 24.1 23.2 Currency
loss (gain) (1.8 ) 1.3 (1.0 ) (1.6 ) Income tax (benefit) expense
1.1 (2.0 ) 0.7 (1.6 ) (Gain) loss on sale of assets (0.1 )
(0.1 ) (0.2 ) 0.3 7.9 13.3 42.6 41.5
Adjusted EBITDA based on credit agreement 14.9
13.2 47.1 41.2 Net Sales 57.0
55.4 179.1 163.7
Adjusted EBITDA Margin(1) 26.1 %
24.0 % 26.3 % 25.2 %
(1)
Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA
into Net Sales. These calculations were performed on the actual
results and not rounded figures. ** Adjusted EBITDA for the
three and nine months ended October 2, 2010 as shown is based on
the 2008 credit agreement calculation. Modifications to this
agreement in the Company's 2011 credit agreement allow for an
adjustment for excess bonus payments over target not to exceed $2.6
million. This adjustment to the credit agreement resulted in no
change to the Company's Adjusted EBITDA for the three and nine
months ended October 2, 2010.
X-Rite, Incorporated
Reconciliation of reported earnings and diluted earnings per
share to adjusted earnings and adjusted diluted earnings per
share* As Reported As
Adjusted Nine Months Ended Debt Refinancing and Nine Months Ended
October 1, 2011 Related Charges(b) October 1, 2011 Net
Income $ 4.5 $ 13.8 $ 18.3 Diluted Earnings Per Share $ 0.05
$ 0.16 $ 0.21 (b) These adjustments present the Company's
results of operations excluding refinancing and related charges.
The adjusted financial results are used by management, and allow
investors to evaluate the operating performance of the Company on a
comparable basis.
* To supplement the consolidated financial statements presented
in accordance with Generally Accepted Accounting Principles
('GAAP'), the Company presents the non-GAAP financial measures,
Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Diluted
Earnings Per Share, as measures of our core operating performance.
Adjusted EBITDA is defined as net income (loss) before
depreciation, amortization, restructuring and other related costs,
share-based compensation expense, net interest expense, currency
loss (gain), income tax benefit, (gain) loss on sale of assets and
other special items, which adjustments represent significant items
that are not part of our core operations. The Company uses Adjusted
EBITDA and Adjusted EBITDA Margin as a measure of liquidity and its
ability to meet its debt service and because its senior credit
facility uses Adjusted EBITDA to measure the Company’s compliance
with certain covenants. In addition, the Company presents Adjusted
Diluted Earnings Per Share to exclude the effects of the debt
refinancing and related charges. These adjustments present the
Company's results of operations excluding the debt refinancing and
related charges. The Company believes these non-GAAP measures
provide useful information to both management and investors to
increase comparability to the prior period by adjusting for certain
items that may not be indicative of core operating measures. Other
companies may calculate these non-GAAP measures (or similarly
titled measures) differently. Management does not, nor should
investors, consider such non-GAAP financial measures in isolation
from, or as a substitution for, financial information prepared in
accordance with GAAP. A reconciliation of all non-GAAP measures
included in this press release, to the most directly comparable
GAAP measures, are found in the financial tables above.
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