Exhibit 99.1
X-Rite Reports Solid First Quarter Results with Pro Forma Revenue Growth
of 6.3% Implementation of Cost Savings Synergies Ahead of Target
GRAND RAPIDS, Mich.--(BUSINESS WIRE)--May 8, 2007--X-Rite,
Incorporated (NASDAQ:XRIT) today announced its financial results for
the first quarter ended March 31, 2007.
First Quarter Highlights:
-- First quarter combined net sales from continuing operations of
$57.7 increased 6.3 percent on a pro forma basis over the
first quarter of 2006
-- Gross margins increased to 62.1 percent in the first quarter
from 58.1 percent in the fourth quarter of 2006
-- Amazys integration significantly ahead of schedule, with cost
savings of $11.4 million achieved during the first nine months
of combined operations
-- Sales backlog remained strong at approximately $15 million at
the end of March 2007
-- Sale of non-core Labsphere business for $14.3 million
completed on February 7, 2007
The Company reported first quarter 2007 net sales from continuing
operations of $57.7 million, versus $27.2 million for the first
quarter of last year on a stand-alone basis and $54.3 million on a
combined pro forma basis. Gross margins for the first quarter were
62.1 percent and included $0.1 million of restructuring related
charges. Operating income for the first quarter totaled $5.0 million
and included $4.5 million in acquisition and restructuring related
charges ("acquisition and restructuring expenses"). The Company
reported net income in the first quarter of 2007 of $7.8 million, or
$0.27 per diluted share, which included $7.6 million, or $0.26 per
diluted share, of discontinued operations related to the sale of the
Labsphere business. Net income from continuing operations was $0.2
million, or $0.01 per diluted share.
Adjusted operating income from continuing operations, which
excludes acquisition and restructuring expenses, was $9.5 million and
reflects a gross margin of 62.3 percent for the first quarter of 2007.
Adjusted net income from continuing operations, which excludes
acquisition and restructuring expenses, was $3.1 million, or $0.11 per
diluted share. A reconciliation of GAAP earnings from continuing
operations to adjusted earnings is included in this release.
"Overall, our revenue performance in the first quarter was on
target with our internal expectations. Our customer relationships
remain healthy, as our integrated product roadmaps have gained
acceptance. Further, our core markets are generally performing as
expected and the integration related disruptions we faced in the
fourth quarter have been significantly reduced in most areas," stated
Thomas J. Vacchiano, Jr., Chief Executive Officer of X-Rite. "Our
markets and future growth opportunities remain promising as evidenced
by our sustained backlog and order levels at the end of the first
quarter."
"We are pleased to report that we have continued to achieve cost
synergies at an accelerated pace while delivering solid top line
performance. In the first nine months of combined operations with our
Amazys acquisition, we generated $11.4 million of cost savings,
reaching and significantly exceeding our $7 million to $9 million
target set for the first twelve months," stated Mary E. Chowning,
Chief Executive Officer of X-Rite. "Specifically, we oversaw the
closure of 14 facilities worldwide, implemented our product line
integration plans, consolidated key financial and back office
operations, and reduced headcount by 16 percent. Our focused execution
on the integration plan reflects a balanced commitment to nurturing
the long-term potential for X-Rite while meeting or exceeding our cost
synergy goals."
The first quarter results included the following charges related
to the Amazys acquisition and restructuring expenses:
Description Statement of Amount
Operations Caption
- ----------------------------------------------------------------------
Product line integration related Cost of goods sold $ 0.1 million
write-offs
- ----------------------------------------------------------------------
Amortization of Amazys related Operating expenses $ 2.7 million
intangibles
- ----------------------------------------------------------------------
Integration and restructuring costs Operating expenses $ 1.7 million
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Total pre-tax charges related to $ 4.5 million
Amazys acquisition
- ----------------------------------------------------------------------
"Our rapid realization of cost synergies has positively impacted
the direction of our operating margin. Excluding acquisition and
restructuring expenses, it continued to improve versus historical
levels for the first quarter," continued Chowning. "As we achieve the
remainder of our targeted synergies, we will see ongoing improvements
in operating leverage and cash flow, which we will use to fund capital
expenditures, interest costs, working capital and debt reduction.
EBITDA, excluding acquisition and restructuring expenses, was $12.3
million or 21.3 percent of sales for the first quarter."
Amazys Transaction
X-Rite launched its formal tender offer for outstanding Amazys
shares on March 24, 2006. The consideration offered for each Amazys
share 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. X-Rite acquired the final
0.3 percent through a statutory squeeze out process in early 2007.
Outlook
As previously announced, the Company expects aggregate revenue
growth on a pro forma basis to be flat for the initial 12 months
following the close of the acquisition. Estimates for full year 2007
annual revenue growth are 4 to 6 percent.
During full year 2007, the Company expects to realize additional
cost synergies related to the Amazys integration of $14 million to $16
million, including the $5.3 million contribution from the first
quarter. Total cumulative synergies anticipated by year-end 2007 range
from $20 million to $22 million.
"We have made significant progress in realizing our projected cost
synergies and have strengthened our operational foundation during the
process," stated Vacchiano. "Our success to date supports our
confidence in the future, as we bring the integration to successful
completion in the next 12 to 18 months."
Conference Call
The Company will conduct a live audio webcast discussing its first
quarter 2007 results on Tuesday, May 8, 2007 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, the Company's 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) X-Rite, which recently acquired Amazys, 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 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.
Consolidated Financial Highlights
(Unaudited - in thousands except EPS)
Q1 Q1
2007 2006
---------- ---------
Net Sales $57,717 $27,162
Gross Profit 35,836 17,925
Gross Profit Percent 62.1% 66.0%
Selling and Marketing 14,092 8,483
R&D and Engineering 8,633 4,584
General and Administrative 6,378 4,685
Restructuring 863 -
Integration 862 553
Operating Income (Loss) 5,008 (380)
Interest Expense (4,612) (5)
Other Income (Expense) (12) 228
Pre-Tax Income (Loss) 384 (157)
Income (Loss) From Continuing Operations 217 (134)
Discontinued Operations, Net 7,593 370
Net Income $7,810 $236
Basic and Diluted Earnings (Loss) Per Share
Continuing Operations $0.01 $(0.01)
Discontinued Operations $0.26 $0.02
Average Shares Outstanding
Basic 28,664 21,241
Diluted 28,973 21,504
Cash and Investments $11,821 $16,930
Accounts Receivable 39,478 29,164
Inventory 31,300 19,760
Other Current Assets 23,149 5,122
Goodwill and Other Intangible Assets 277,751 20,055
Other Non-Current Assets 71,167 65,671
---------- ---------
Total Assets 454,666 156,702
Current Liabilities 55,883 28,343
Non-Current Liabilities 203,399 413
---------- ---------
Total Liabilities 259,282 28,756
Shareholders' Equity $195,384 $127,946
Capital Expenditures (a) $2,738 $14,598
Depreciation and Amortization (a) (b) $5,461 $1,676
International Sales (a) 66.1% 49.5%
(a) Excludes Labsphere, Inc.
(b) Excludes amortization of deferred financing costs.
U.S. GAAP to Non-GAAP Measure Reconciliations and
Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA)
For the Three Months Ended March 31, 2007
(Unaudited - in thousands except EPS)
- ----------------------------------------------------------------------
Amazys
Acquisition
Non-GAAP Measures U.S. GAAP Related Non-GAAP
Used By Management Measure Adjustments Measure
-------------------------------- --------- ----------- --------
1. Gross Profit $35,836 $128 (a) $35,964
========= ========
Gross Profit Percent 62.1% 62.3%
2. Operating Expenses:
Selling and Marketing $14,092 $(631) (b) $13,461
R&D and Engineering 8,633 (1,704) (b) 6,929
General and Administrative 6,378 (323) (b) 6,055
Restructuring 863 (863) (c) -
Integration 862 (862) (d) -
--------- --------
$30,828 $26,445
========= ========
3. Operating Income $5,008 $4,511 (e) $9,519
========= ========
4. Net Income From Continuing $217 $2,932 (f) $3,149
Operations ========= ========
5. Earnings From Continuing
Operations Per Share
Basic $0.01 $0.11
Diluted $0.01 $0.11
Average Basic Shares
Outstanding 28,664 28,664
Average Diluted Shares
Outstanding 28,973 28,973
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Amazys
Earnings Before Acquisition
Interest, Taxes, Depreciation Non-GAAP Related Non-GAAP
and Amortization (EBITDA) Measure Adjustments Measure
-------------------------------- --------- ----------- --------
EBITDA (Non-GAAP Measure):
Net Income From Continuing
Operations (GAAP Measure) $217 $2,932 $3,149
Interest Expense 4,612 - 4,612
Income Taxes 167 1,579 1,746
Depreciation and Amortization 5,461 (2,700) 2,761
--------- ----------- --------
EBITDA (Non-GAAP Measure) $10,457 $1,811 $12,268
========= =========== ========
- ----------------------------------------------------------------------
(a) Cost of sales adjustment for end-of-life product charges related
to acquisition.
(b) Operating expense adjustments for acquisition-related amortization
of intangible assets.
(c) Restructuring charges related to acquisition for severance and
severance-related expenses.
(d) Integration expenses related to acquisition.
(e) Operating income effect of adjustments (a) through (d).
(f) Adjustment (e) after tax using a 35% tax rate.
CONTACT: X-Rite, Incorporated
Mary E. Chowning, CFO, 616-803-2777
mchowning@xrite.com