Exhibit 99.1
X-Rite Reports Sound Third Quarter Results after Completing Amazys Tender Offer
GRANDVILLE, Mich.--(BUSINESS WIRE)--Nov. 7, 2006--X-Rite, Incorporated
(NASDAQ:XRIT)(SWX:XRI) today announced its financial results for the third
quarter ended September 30, 2006.
Third Quarter Highlights:
-- Third quarter combined net sales of $54.2 million including Amazys
activity from July 5, 2006
-- Amazys acquisition integration plan and synergies on target through
third quarter
-- CEO succession plan successfully completed with Tom Vacchiano assuming
CEO duties on October 1, 2006
-- Sale of headquarters real estate to Target Corporation for $14 million
announced
-- Imaging & Media and Industrial category product integration plans
launched
-- Successful launch of new embedded color management solution in Hewlett
Packard's DesignJet Z printer line
The Company reported third quarter 2006 net sales of $54.2 million, versus
pre-acquisition sales of $28.4 million for the third quarter of last year. Gross
margins were 41.3 percent and included $10.1 million of restructuring and
acquisition related charges. Operating losses for the third quarter totaled
$29.5 million and included $33.6 million of restructuring and acquisition
related charges. The Company reported a net loss in the third quarter of 2006 of
$28.3 million, or 99 cents per basic share.
Operating income, excluding restructuring and acquisition related charges
("acquisition and restructuring expenses"), for the third quarter was $4.1
million, reflecting gross margins of 60.1 percent. The net loss, excluding
acquisition and restructuring expenses, was $6.4 million, or 22 cents per basic
share. A reconciliation of the reported loss to the loss excluding acquisition
and restructuring expenses is provided elsewhere in this release.
"Our first quarter of combined operations went as planned with revenues
that met our expectations. Additionally, we had a good start on achieving our
planned cost synergies," stated Thomas J. Vacchiano, Jr., Chief Executive
Officer of X-Rite. "The quality of our integration planning before the closing
provided a strong foundation for our first quarter as a combined company."
The third quarter results include the following charges and expenses
related to the Amazys acquisition and related restructuring:
Statement of Operations
Description Caption Amount
- ----------------------------------------------------------------------
Product line Cost of goods sold $ 5.3 million
integration related
write-offs
- ----------------------------------------------------------------------
Amortization of Amazys Cost of goods sold 4.8 million
inventory write-up
- ----------------------------------------------------------------------
Amortization of Amazys Operating expenses 3.2 million
related intangibles
- ----------------------------------------------------------------------
Acquired Amazys in- Operating expenses 11.1 million
process R&D
- ----------------------------------------------------------------------
Integration and Operating expenses 9.2 million
restructuring costs
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Total pre-tax charges $33.6 million
related to Amazys
acquisition
- ----------------------------------------------------------------------
"Operating income, excluding acquisition and restructuring expenses, as a
percent of sales more than doubled to 7.7 percent for the third quarter of 2006
versus 3.7 percent in the prior year quarter reflecting the impact of the cost
synergies we are implementing," stated Mary E. Chowning, Chief Financial Officer
of X-Rite. "Additionally, we generated $13.2 million of cash flow from
operations during the third quarter which was used to fund capital expenditures,
interest costs and reduce our net debt position. In addition, our EBITDA
(earnings before interest, taxes, depreciation and amortization) was $7.2
million or 13.4 percent of sales for the third quarter, reflecting operating
income, excluding acquisition and restructuring expenses, of $4.1 million and
depreciation and amortization of approximately $3.1 million."
Amazys Transaction
X-Rite launched its formal tender offer for all Amazys shares on March 24,
2006. The consideration offered for each Amazys share in the tender offer was
cash of 77 CHF plus 2.11 shares of X-Rite common stock. On July 5, 2006, the
Company completed the tender offer for 3,422,492 shares of Amazys, or 99.7
percent of the outstanding shares, at a total value of approximately $295
million.
Outlook
As previously announced, the Company expects revenue growth on a proforma
basis to be flat for the near term. Preliminary estimates for full year 2007
revenue growth is in the 4 percent to 6 percent range.
"We are enthusiastic about our new products that are launching in the
second half of 2006. PlateScope, Matchstik 1.1 and the HP DesignJet Z embedded
sensor are being well received in the marketplace," said Vacchiano. "At the same
time, our integration of Amazys is in the execution stage and moving along as
planned.
The Company expects to achieve the following portion of the cost synergies
related to the Amazys acquisition during the initial year following the closing
of the acquisition:
Manufacturing 10-15% of $9.0 million total synergies
Selling & Marketing 45-55% of $5.5 million total synergies
Engineering 30-40% of $5.0 million total synergies
General & Administration 40-50% of $5.5 million total synergies
"As part of the Amazys integration, we have the opportunity to recognize
significant annual cost synergies totaling $25 million by the end of the third
year following the close," stated Chowning. "Our synergy plans are on target and
synergies from operating expense costs are expected to be $16 million annually,
with $9 million of additional reductions related to manufacturing."
Conference Call
The Company will conduct a live audio webcast discussing its third quarter
2006 results on Tuesday, November 7, 2006 at 11:00 a.m. ET. The call will be
co-hosted by Thomas J. Vacchiano, Jr., the Company's Chief Executive Officer and
Mary E. Chowning, its Chief Financial Officer. To access this webcast, as well
as all future webcasts, use the X-Rite corporate website at www.x-rite.com.
Select the Investor Relations page and click on the conference call link for the
webcast. In addition, an archived version of the webcast conference call will be
available on X-Rite's website shortly after the live broadcast.
About X-Rite
(NASDAQ:XRIT)(SWX:XRI) X-Rite, which recently acquired GretagMacbeth, is
the global leader in color-measurement solutions, offering hardware, software
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 which 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 measure. 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. These 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. 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 U.S. 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.
Consolidated Financial Highlights
(Unaudited - in thousands except EPS)
Q3 Q2 Q1 Q4 Q3
2006 2006 2006 2005 2005
--------- --------- --------- --------- ---------
Net Sales $54,154 $31,972 $30,020 $41,927 $28,432
Gross Profit 22,385 19,471 19,438 28,748 18,204
Gross Profit Percent 41.3% 60.9% 64.8% 68.6% 64.0%
Selling and
Marketing 13,616 9,183 8,926 10,181 8,940
R&D and Engineering 10,004 4,361 4,900 4,112 4,237
General and
Administrative 7,926 4,744 4,899 4,174 3,987
Acquired In-Process
R&D 11,107 - - - -
Restructuring 8,183 - - - -
Integration 1,008 579 553 - -
Operating Income
(Loss) (29,459) 604 160 10,281 1,040
Interest Expense (4,354) (28) (5) (1) -
Gain (Loss) on
Derivative
Instrument (92) 2,175 - - -
Other Income
(Expense) 181 94 228 (402) 54
Pre-tax Income
(Loss) (33,724) 2,845 383 9,878 1,094
Net Income (Loss) $(28,260) $1,620 $236 $7,481 $922
Earnings (Loss) Per
Share
Basic $(0.99) $0.08 $0.01 $0.35 $0.04
Diluted $(0.99) $0.07 $0.01 $0.35 $0.04
Average Shares
Outstanding
Basic 28,507 21,343 21,241 21,218 21,186
Diluted 28,507 21,642 21,504 21,390 21,430
Cash and Investments $13,840 $20,341 $16,930 $21,359 $21,095
Accounts Receivable 33,073 25,040 29,164 33,536 23,139
Inventory 33,173 20,101 19,760 17,631 16,849
Other Current Assets 14,227 6,633 5,122 4,107 3,628
Noncurrent Assets 342,774 91,740 85,726 71,002 69,419
--------- --------- --------- --------- ---------
Total Assets 437,087 163,855 156,702 147,635 134,130
Current Liabilities 59,517 33,374 28,343 19,640 13,580
Noncurrent
Liabilities 192,278 332 413 413 413
--------- --------- --------- --------- ---------
Total
Liabilities 251,795 33,706 28,756 20,053 13,993
Shareholders'
Equity $185,292 $130,149 $127,946 $127,582 $120,137
Capital Expenditures $5,124 $3,394 $14,613 $1,541 $482
Depreciation and
Amortization (a) $7,060 $1,862 $1,791 $1,558 $1,586
International Sales 60.6% 53.3% 48.8% 42.0% 50.4%
(a) Excludes amortization of deferred financing costs.
Consolidated Financial Highlights, continued
(Unaudited - in thousands except EPS)
Three Months Ended Nine Months Ended
------------------------ ------------------------
September 30, October 1, September 30, October 1,
2006 2005 2006 2005
------------- ---------- ------------- ----------
Net Sales $54,154 $28,432 $116,146 $89,012
Gross Profit 22,385 18,204 61,294 57,241
Gross Profit Percent 41.3% 64.0% 52.8% 64.3%
Selling and
Marketing 13,616 8,940 31,725 26,465
R&D and Engineering 10,004 4,237 19,265 12,204
General and
Administrative 7,926 3,987 17,569 14,304
Acquired In-Process
R&D 11,107 - 11,107 -
Restructuring 8,183 - 8,183 -
Integration 1,008 - 2,140 -
Founders' Insurance - - - (1,154)
Operating Income
(Loss) (29,459) 1,040 (28,695) 5,422
Interest Expense (4,354) - (4,387) (38)
Gain (Loss) on
Derivative
Instrument (92) - 2,083 -
Write-Down of Other
Investments - - - (332)
Other Income 181 54 503 105
Pre-Tax Income
(Loss) (33,724) 1,094 (30,496) 5,157
Net Income (Loss) $(28,260) $922 $(26,404) $3,571
Earnings (Loss) Per
Share
Basic $(0.99) $0.04 $(1.12) $0.17
Diluted $(0.99) $0.04 $(1.12) $0.17
Average Shares
Outstanding
Basic 28,507 21,186 23,640 21,127
Diluted 28,507 21,430 23,640 21,402
GAAP to Non-GAAP Reconciliation
Consolidated Financial Highlights
For the Three Months Ended September 30, 2006
(Unaudited - in thousands except EPS)
U.S. GAAP Adjustments Non-GAAP
--------- ----------- --------
Net Sales $54,154 $- $54,154
Gross Profit 22,385 10,148 (a) 32,533
Gross Profit Percent 41.3% 60.1%
Selling and Marketing 13,616 (600)(b) 13,016
R&D and Engineering 10,004 (2,238)(b) 7,766
General and Administrative 7,926 (323)(b) 7,603
Acquired In-Process R&D 11,107 (11,107)(c) -
Restructuring 8,183 (8,183)(d) -
Integration 1,008 (1,008)(e) -
Operating Income (Loss) (29,459) 33,607 4,148
Interest Expense (4,354) (4,354)
Loss on Derivative Instrument (92) (92)
Write-Down of Other Investments - -
Other Income 181 181
Pre-Tax Income (Loss) (33,724) 33,607 (117)
Net Income (Loss) $(28,260) $21,845 $(6,415)
Earnings (Loss) Per Share
Basic $(0.99) $0.77 $(0.22)
Diluted $(0.99) $0.77 $(0.22)
Average Shares Outstanding
Basic 28,507 28,507
Diluted 28,507 28,507
(a)Cost of sales adjustment for end-of-life product charges of $5,294
and amortization of inventory fair value adjustment of $4,854.
Both adjustments were acquisition related.
(b)Operating expense adjustments for acquisition-related amortization
of intangible assets.
(c)One-time charge for acquired in-process R&D related to acquisition.
(d)Restructuring charges for severances, and trademark and trade name
write downs.
(e)Integration expenses related to acquisition.
GAAP to Non-GAAP Reconciliation
Consolidated Financial Highlights
For the Nine Months Ended September 30, 2006
(Unaudited - in thousands except EPS)
U.S. GAAP Adjustments Non-GAAP
--------- ----------- ---------
Net Sales $116,146 $- $116,146
Gross Profit 61,294 10,148 (a) 71,442
Gross Profit Percent 52.8% 61.5%
Selling and Marketing 31,725 (600)(b) 31,125
R&D and Engineering 19,265 (2,238)(b) 17,027
General and Administrative 17,569 (323)(b) 17,246
Acquired In-Process R&D 11,107 (11,107)(c) -
Restructuring 8,183 (8,183)(d) -
Integration 2,140 (2,140)(e) -
Operating Income (Loss) (28,695) 34,739 6,044
Interest Expense (4,387) (4,387)
Gain on Derivative Instrument 2,083 2,083
Write-Down of Other Investments - -
Other Income (Expense) 503 503
Pre-Tax Income (Loss) (30,496) 34,739 4,243
Net Income (Loss) $(26,404) $22,580 $(3,824)
Earnings (Loss) Per Share
Basic $(1.12) $0.96 $(0.16)
Diluted $(1.12) $0.96 $(0.16)
Average Shares Outstanding
Basic 23,640 23,640
Diluted 23,640 23,640
(a)Cost of sales adjustment for end-of-life product charges of $5,294
and amortization of inventory fair value adjustment of $4,854.
Both adjustments were acquisition related.
(b)Operating expense adjustments for acquisition-related amortization
of intangible assets.
(c)One-time charge for acquired in-process R&D related to acquisition.
(d)Restructuring charges for severances, and trademark and trade name
write downs.
(e)Integration expenses related to acquisition.
CONTACT: X-Rite, Incorporated
Mary E. Chowning, CFO, 616-257-2777
mchowning@xrite.com