X-Rite, Incorporated (NASDAQ:XRIT) today announced its financial
results for the fourth quarter and full fiscal year ended December
31, 2011.
Financial highlights:
- Net sales of $58.5 million, down 0.9
percent from the fourth quarter 2010, and 2011 net sales of $237.6
million, up 6.7 percent year over year
- Operating income of $10.0 million, up
12.6 percent from the fourth quarter 2010, and 2011 operating
income of $38.2 million, up $9.2 million, or 32.0 percent, year
over year
- Net income of $44.9 million, or $0.51
per diluted share, up $40.9 million from the fourth quarter 2010.
For the full year 2011, the Company is reporting earnings of $0.56
per diluted share, up $0.52 from 2010. The fourth quarter and full
year results were positively impacted by a release of tax valuation
allowances
- Adjusted EBITDA of $16.0 million, up
$0.9 million from the fourth quarter 2010. Adjusted EBITDA was 27.4
percent of net sales for the fourth quarter of 2011 compared to
25.5 percent of net sales for the fourth quarter 2010. For the full
year 2011, adjusted EBITDA was $63.2 million, up $6.9 million, or
12.3 percent, from 2010
- Debt re-payments of $10.0 million in
the fourth quarter 2011. Total Debt, including the Mandatorily
Redeemable Preferred Stock, reduced by $33.8 million year over
year
The Company reported a net sales decrease of $0.5 million, or
0.9 percent, for the fourth quarter 2011 as compared to the fourth
quarter 2010. For the quarter, the Company saw continuing gains in
most of our major product lines, particularly the Imaging and
Media, Standards, and Support Services product lines which grew
3.6, 4.7, and 9.6 percent, respectively. These gains were offset by
a reduction in sales in the Industrial markets of $2.4 million, or
17.1 percent, for the quarter where continued challenging economic
conditions led to inventory adjustments and project deferrals at
certain of our global customers. The Company’s new product
offerings and geographic expansion investments were key factors in
the Imaging and Media growth for the period while the Standards
product line growth reflects the strong momentum for the Pantone
FASHION + HOME system extension, which was released earlier in the
year. Excluding the impact of positive changes in foreign exchange
rates due to a weakening U.S. Dollar, net sales decreased by $0.9
million, or 1.5 percent, on a quarter over quarter basis.
Thomas J. Vacchiano Jr., the Company’s Chief Executive Officer,
stated, “With the mixed global economic conditions we experienced
in the fourth quarter it was positive to see year over year sales
gains from our new product launches and Asia Pacific expansion. For
the full year, X-Rite continued to produce strong cash flows and
improve our overall financial strength, including further
deleveraging our balance sheet and significantly increasing our net
income and earnings per share. As the clear market leader, we will
continue to make the investments in new products and technology
that should leave us well positioned to drive new sales growth as
the global economy recovers.”
The Company’s operating expenses were reduced from the fourth
quarter 2010 by $1.8 million, or 7.1 percent. Increased spending on
strategic initiatives, such as Asia Pacific expansion, and the
negative effect of exchange rates on operating expenses were offset
by other cost reductions. Operating income as a percent of net
sales improved to 17.2 percent for the fourth quarter 2011,
compared to 15.1 percent for the fourth quarter 2010.
Including a net tax benefit of $36.5 million related to
releasing $47.2 million of tax valuation allowances, the Company
reported fourth quarter net income of $44.9 million, or $0.51 per
diluted share, an increase of $40.9 million, or $0.46 per diluted
share, from the fourth quarter of 2010. The Company began to record
a valuation allowance against United States deferred tax assets in
the fourth quarter of 2007. The release of a significant portion of
this valuation allowance in the quarter reflects the recent trend
of the Company’s profitability driven by the improved operational
performance and the refinancing completed in the first quarter of
2011.
For the year ended December 31, 2011, the Company generated
$35.5 million of cash flows before financing activities. The
Company used this cash flow to reduce its total debt in 2011 from
$183.6 million to $149.8 million, or by $33.8 million, including
the redemption of the mandatorily redeemable preferred stock.
Rajesh K. Shah, X-Rite’s Chief Financial Officer, commented, “The
Company’s financial performance in 2011 reflects our ability and
commitment to consistently maintain high levels of profitability
and cash flows. We remain focused on using our strong operating
cash flow in a balanced manner to support growth while continuing
to pay down debt."
Vacchiano concluded, “We are encouraged by the continued strong
market acceptance of our new product releases and positive
financial returns from our strategic investments. Global economic
softness which was evident at the end of 2011 continued through the
start of 2012. While these conditions are estimated to result in a
low single digit decrease in our first quarter 2012 revenues as
compared to the first quarter of 2011, we have seen strengthening
as we have moved through the quarter. With the successful launch of
PantoneLive in March, additional planned new product launches over
the course of 2012 and ongoing gains from our key strategic
initiatives, we are optimistic about the Company’s overall growth
potential and financial performance for the full year.”
Conference Call
X-Rite invites all interested parties to listen to the live
webcast discussing the fourth quarter and full fiscal year results
on Tuesday, March 13, 2012 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 877-407-9205 for domestic
callers and 201-689-8054 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 Twelve Months Ended December 31,
January 1, December 31, January 1, 2011
2011 2011 2011 Net Sales $ 58.5
$ 59.0 $ 237.6 $ 222.7 Cost of sales 24.2
23.9 96.9 89.6
Gross profit 34.3 35.1 140.7 133.1 Gross margin 58.7 % 59.5
% 59.2 % 59.8 % Operating expenses: Selling and marketing
13.8 14.9 58.2 56.4 Research, development and engineering 5.2 6.1
23.2 23.7 General and administrative 5.3 5.1 21.1 22.0
Restructuring and other related charges - -
- 2.0 24.3
26.1 102.5 104.1
Operating
income 10.0 9.0 38.2 29.0 Interest expense (2.1 ) (5.9 )
(12.4 ) (28.0 ) Loss on redemption of preferred shares and debt
refinancing costs - - (13.8 ) (1.1 ) Other income 0.5
0.3 1.6 1.5
Income before income taxes 8.4 3.4 13.6 1.4 Income
tax benefit (36.5 ) (0.6 ) (35.8 ) (2.2
)
Net income $ 44.9 $ 4.0 $ 49.4
$ 3.6 Earnings Per Share Basic $ 0.52 $ 0.05 $ 0.57 $
0.04 Diluted 0.51 0.05 0.56 0.04
X-Rite, Incorporated Net Sales by Product Line
(unaudited) (in millions) Three
Months Ended Twelve Months Ended December 31,
January 1, December 31, January 1, 2011
2011 2011 2011 Imaging and Media $ 23.2 $ 22.4
$ 90.8 $ 87.3 Industrial 11.4 13.8 50.0 47.3 Standards 11.1 10.6
46.9 42.1 Support Services 7.1 6.4 29.1 25.8 Retail 4.6 4.6 16.1
15.4 Other 1.1 1.2 4.7 4.8
Total
$ 58.5 $ 59.0 $ 237.6 $ 222.7
X-Rite,
Incorporated Consolidated Condensed Balance Sheet
(unaudited) (in millions)
December 31, January 1, 2011 2011
Cash $ 6.3 $ 11.7 Accounts Receivable 35.7 32.2 Inventory
26.2 27.7 Deferred Income Taxes 12.8 0.7 Other Current Assets
4.4 4.6
Total Current Assets 85.4 76.9
Property, plant and equipment, net 38.7 40.2 Goodwill and Other
Intangible Assets 291.0 302.8 Deferred Income Taxes 25.9 - Other
Non-Current Assets 22.1 19.2
Total Assets
463.1 439.1 Current Maturities on Long-Term
Debt 11.8 1.4 Accounts Payable and Other Accrued Liabilities
30.7 33.5
Total Current Liabilities 42.5 34.9
Long-Term Debt 138.0 135.2 Mandatorily Redeemable Preferred
Stock(1) - 36.4 Other Liabilities 16.0 11.1
Total
Liabilities 196.5 217.6
Shareholders' Investment
266.6 221.5
Total Liabilities and Shareholders'
Investment $ 463.1 $ 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)
Twelve Months Ended
December 31, January 1, 2011 2011
Net income $ 49.4 $ 3.6 Non-cash adjustments to net income:
Depreciation 6.5 6.2 Amortization 16.5 16.2 Non-cash interest
expense 3.4 11.1 Loss on redemption of preferred shares and debt
refinancing costs 13.8 1.1 Deferred income tax credit (38.8 ) (4.9
) Other 4.2 7.3 Sub-total non-cash
adjustments 5.6 37.0 Changes in operating assets and liabilities
(7.0 ) 2.3
Net Cash provided by operating
activities 48.0 42.9
Net Cash used for investing
activities (12.5 ) (11.5 )
Cash flows
before financing activities 35.5 31.4 Proceeds from
long-term debt 185.2 16.5 Payments of long-term debt (172.3 ) (63.5
) Redemption of preferred shares (47.0 ) - Debt amendment and
refinancing costs (5.6 ) (0.4 ) Other 0.2 1.0
Net Cash used for financing activities (39.5 ) (46.4
) Effect of exchange rate changes on cash (1.4 )
(2.4 ) Net decrease in cash (5.4 ) (17.4 )
Cash,
beginning of period 11.7 29.1
Cash, end of period $ 6.3 $ 11.7
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 Twelve Months
Ended December 31, January 1, December 31,
January 1, 2011 2011 **
2011
2011 **
Net income $ 44.9
$ 4.0 $ 49.4 $ 3.6
EBITDA Adjustments: Depreciation 1.6 1.6 6.5 6.2
Amortization 4.1 4.1 16.5 16.2 Restructuring and other related
costs - - - 2.0 Share-based compensation 0.4 0.3 2.1 2.7 Net
interest expense and debt refinancing and related charges 2.1 5.9
26.2 29.1 Currency gain (0.5 ) (0.1 ) (1.4 ) (1.6 ) Income tax
benefit (36.5 ) (0.6 ) (35.8 ) (2.2 ) (Gain) loss on sale of assets
(0.1 ) (0.1 ) (0.3 ) 0.3 (28.9 )
11.1 13.8 52.7
Adjusted EBITDA based on credit
agreement 16.0 15.1 63.2 56.3
Net Sales 58.5 59.0 237.6
222.7
Adjusted EBITDA
Margin(1) 27.4 % 25.5 %
26.6 % 25.3 %
(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 twelve months ended January 1, 2011 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 twelve
months ended January 1, 2011.
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 and Adjusted EBITDA Margin, 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 measures 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. 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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