Exhibit 99.1
X-Rite Reports Second Quarter Results
Pro Forma Revenue Grows 5.5% and Integration Cost Synergies Remain
Ahead of Schedule
GRAND RAPIDS, Mich.--(BUSINESS WIRE)--Aug. 7, 2007--X-Rite,
Incorporated (NASDAQ:XRIT) today announced its financial results for
the second quarter ended June 30, 2007.
Second Quarter Highlights:
-- Net sales from continuing operations totaled $60.7 million, a
5.5 percent increase year-over-year after combining 2006
Amazys Holding results with X-Rite on a pro forma basis
-- Operating income from continuing operations increased 109
percent to $6.9 million compared to the same period in the
prior year after combining 2006 Amazys Holding results with
X-Rite on a pro forma basis
-- Amazys integration remains significantly ahead of timetable,
with cost savings of $16.8 million achieved during twelve
months of combined operations
-- Sales backlog remained strong at the end of June 2007
-- Successful launch of Personal Designer 1.0 visualization
software for architectural paint color selection
The Company reported second quarter 2007 net sales from continuing
operations of $60.7 million compared with $32.0 million in the
year-earlier period on a stand-alone basis and $57.6 million on a
combined pro forma basis. Gross margins were 60.9 percent, down
slightly from 61.2 percent in the second quarter of 2006. Operating
income totaled $6.9 million and included $4.0 million in acquisition
and restructuring related charges related to the Amazys acquisition
("acquisition and restructuring expenses"). The Company reported net
income of $2.1 million or $0.07 per diluted share, versus $1.6 million
or $0.07 per diluted share for the same period in 2006. Prior year
stand-alone results included $3.1 million of net sales and $0.5
million of net income from Labsphere, Inc., an X-Rite subsidiary sold
in February 2007.
Adjusted operating income, which excludes acquisition and
restructuring expenses, was $10.9 million, and reflects a gross margin
of 60.9 percent for the second quarter of 2007 versus $3.3 million and
a gross margin of 58.5 percent on a proforma basis in the same period
of 2006. Adjusted net income from continuing operations, which
excludes acquisition and restructuring expenses, was $4.7 million, or
$0.16 per diluted share. A reconciliation of GAAP earnings from
continuing operations to adjusted earnings is included in this
release.
"Overall, our core markets are performing as expected, and the
integration related sales disruptions we faced in 2006 are being
addressed," stated Thomas J. Vacchiano, Jr., Chief Executive Officer
of X-Rite. "Our revenue performance in the second quarter was
consistent with our expectations as we continue to successfully
execute the integration strategy and expand our customer base.
Further, backlog and order levels at the end of the second quarter
represent a noteworthy gain compared to last year and we believe we
are well positioned to capitalize on future growth opportunities."
Year-to-Date Results
In the first half of 2007, net sales from continuing operations
was $118.5 million, versus $62.0 million for the same period of 2006
on a stand-alone basis and $111.8 million on a combined pro forma
basis. Gross margins were 61.5 percent versus 59.7 percent on a
combined pro forma basis. Operating income totaled $11.9 million and
included $8.4 million in acquisition and restructuring related
charges. The Company reported net income of $9.9 million, or $0.34 per
diluted share. Net income from continuing operations was $2.3 million,
or $0.08 per diluted share. Prior year stand-alone results included
$6.0 million of net sales and $0.9 million of net income from
Labsphere, Inc.
Adjusted operating income, which excludes acquisition and
restructuring expenses, was $20.4 million, and reflects a gross margin
of 61.6 percent for the first six months of 2007 versus $6.4 million
and a gross margin percent of 59.7 on a proforma basis for the first
half of 2006. Adjusted net income from continuing operations, which
excludes acquisition and restructuring expenses, was $7.8 million, or
$0.27 per diluted share.
The second quarter and year to date results included the following
charges related to the Amazys acquisition and restructuring expenses:
Statement of Operations
Description Caption 2007 Q2 2007 YTD
- ----------------------------------------------------------------------
Product line Cost of goods sold $0.0 million $0.1 million
integration related
write-offs
- ----------------------------------------------------------------------
Amortization of Operating expenses 2.7 million 5.3 million
Amazys related
intangibles
- ----------------------------------------------------------------------
Integration and Operating expenses 1.3 million 3.0 million
restructuring costs
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Total pre-tax $4.0 million $8.4 million
charges related to
Amazys acquisition
- ----------------------------------------------------------------------
Outlook
As previously announced, estimates for full year 2007 annual
revenue growth are 4 to 6 percent on a combined pro forma basis.
"The progress achieved with our integration work has given us
increased confidence in our ability to translate these efforts into
generating greater revenue growth rates going forward," stated
Vacchiano.
During full year 2007, the Company expects to realize additional
cost synergies related to the Amazys integration of $14 million to $16
million. This includes the $10.6 million of synergies achieved in the
first six months of 2007. Total cumulative synergies anticipated by
year-end 2007 range from $20 million to $22 million.
"X-Rite has continued to achieve cost synergies at an accelerated
pace, resulting in a doubling of our reported operating income in the
second quarter versus the prior year pro forma results," said Mary E.
Chowning, Chief Financial Officer of X-Rite. "In the first twelve
months of combined operations, we generated $16.8 million in cost
savings, significantly exceeding the $7 million to $9 million target
range set for this time period. As we achieve our remaining synergies,
X-Rite 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. We continue to project that the
integration will be substantially completed by mid 2008."
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.
Conference Call
The Company will conduct a live audio webcast discussing its
second quarter 2007 results on Tuesday, August 7, 2007 at 11:00 a.m.
EDT. 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 closed the Amazys acquisition in July
2006, 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)
(a) (a) (a)
Q2 Q1 Q4 Q3 Q2
2007 2007 2006 2006 2006
--------- --------- --------- --------- ---------
Net Sales $ 60,745 $ 57,717 $ 60,422 $ 51,198 $ 28,859
Gross Profit 36,967 35,836 35,149 20,736 17,649
Gross Profit Percent 60.9% 62.1% 58.2% 40.5% 61.2%
Selling and
Marketing 13,882 14,092 13,030 13,170 8,740
R&D and Engineering 9,692 8,633 6,942 9,691 4,063
General and
Administrative 5,181 6,378 6,864 7,601 4,528
Acquired In-Process
R&D - - - 11,107 -
Restructuring 868 863 1,803 8,183 -
Integration 431 862 1,168 1,008 579
Operating Income
(Loss) 6,913 5,008 5,342 (30,024) (261)
Interest Expense (4,358) (4,612) (4,371) (4,354) (28)
Gain (Loss) on Sale
of Investments 837 - - - (2)
Gain (Loss) on
Derivative
Instruments - - - (92) 2,175
Other Income
(Expense) 52 (12) (691) 181 90
Pre-Tax Income
(Loss) 3,444 384 280 (34,289) 1,974
Net Income (Loss)
From
Continuing
Operations 2,104 217 596 (28,624) 1,100
Discontinued
Operations, Net (36) 7,593 317 364 520
Net Income (Loss) $ 2,068 $ 7,810 $ 913 $(28,260) $ 1,620
Diluted Earnings
(Loss) Per Share
Continuing
Operations $ 0.07 $ 0.01 $ 0.02 $ (1.00) $ 0.05
Discontinued
Operations - 0.26 0.01 0.01 0.02
Net Income (Loss) $ 0.07 $ 0.27 $ 0.03 $ (0.99) $ 0.07
Average Shares
Outstanding
Basic 28,839 28,664 28,541 28,507 21,343
Diluted 29,265 28,973 28,810 28,507 21,642
Cash and Investments $ 15,639 $ 11,821 $ 12,876 $ 13,840 $ 20,341
Accounts Receivable 39,178 39,478 40,226 33,073 25,040
Inventory 32,178 31,300 30,165 33,173 20,101
Other Current Assets 22,841 23,149 22,208 14,227 6,633
Goodwill and Other
Intangible Assets 258,287 280,826 282,674 262,640 25,809
Other Non-Current
Assets 98,993 71,166 74,110 80,134 65,931
--------- --------- --------- --------- ---------
Total Assets 467,116 457,740 462,259 437,087 163,855
Current Liabilities 63,879 55,883 63,065 59,517 33,374
Non-Current
Liabilities 199,395 203,399 213,584 192,278 332
--------- --------- --------- --------- ---------
Total Liabilities 263,274 259,282 276,649 251,795 33,706
Shareholders'
Equity $203,842 $198,458 $185,610 $185,292 $130,149
Capital Expenditures
(b) $ 1,748 $ 2,738 $ 5,691 $ 5,108 $ 3,354
Depreciation and
Amortization (b)(c) $ 5,462 $ 5,461 $ 5,286 $ 6,969 $ 1,752
International Sales
(b) 66.8% 66.1% 67.3% 62.2% 54.9%
(a) Labsphere, Inc. 2006 income statements reclassified to
Discontinued Operations.
(b) Excludes Labsphere, Inc.
(c) Excludes amortization of deferred financing costs.
Consolidated Financial Highlights, continued
(Unaudited - in thousands except EPS)
Quarter Ended Six Months Ended
----------------- ------------------
(a) (a)
June 30, July 1, June 30, July 1,
2007 2006 2007 2006
-------- -------- --------- --------
Net Sales $60,745 $28,859 $118,462 $56,021
Gross Profit 36,967 17,649 72,803 35,574
Gross Profit Percent 60.9% 61.2% 61.5% 63.5%
Selling and Marketing 13,882 8,740 27,974 17,223
R&D and Engineering 9,692 4,063 18,325 8,647
General and Administrative 5,181 4,528 11,559 9,213
Restructuring 868 - 1,731 -
Integration 431 579 1,293 1,132
Operating Income (Loss) 6,913 (261) 11,921 (641)
Interest Expense (4,358) (28) (8,970) (33)
Gain (Loss) on Sale of
Investments 837 (2) 837 (2)
Gain on Derivative Instruments - 2,175 - 2,175
Other Income 52 90 40 318
Pre-Tax Income 3,444 1,974 3,828 1,817
Net Income From
Continuing Operations 2,104 1,100 2,321 966
Discontinued Operations, Net (36) 520 7,557 890
Net Income $ 2,068 $ 1,620 $ 9,878 $ 1,856
Basic Earnings Per Share
Continuing Operations $ 0.07 $ 0.05 $ 0.08 $ 0.05
Discontinued Operations - 0.03 0.26 0.04
Net Income $ 0.07 $ 0.08 $ 0.34 $ 0.09
Diluted Earnings Per Share
Continuing Operations $ 0.07 $ 0.05 $ 0.08 $ 0.05
Discontinued Operations - 0.02 0.26 0.04
Net Income $ 0.07 $ 0.07 $ 0.34 $ 0.09
Average Shares Outstanding
Basic 28,839 21,343 28,751 21,251
Diluted 29,265 21,642 29,119 21,532
(a) Labsphere, Inc. 2006 results reclassified to Discontinued
Operations.
U.S. GAAP to Non-GAAP Measure Reconciliations and
Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA)
For the Three Months Ended June 30, 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 $ 36,967 $ 9 (a) $36,976
========= ========
Gross Profit Percent 60.9% 60.9%
2. Operating Expenses:
Selling and Marketing $ 13,882 $ (631)(b) $13,251
R&D and Engineering 9,692 (1,704)(b) 7,988
General and Administrative 5,181 (323)(b) 4,858
Restructuring 868 (868)(c) -
Integration 431 (431)(d) -
--------- --------
$ 30,054 $26,097
========= ========
3. Operating Income $ 6,913 $ 3,966 (e) $10,879
========= ========
4. Net Income From Continuing
Operations $ 2,104 $ 2,578 (f) $ 4,682
========= ========
5. Earnings From Continuing
Operations Per Share
Basic $ 0.07 $ 0.16
Diluted $ 0.07 $ 0.16
Average Basic Shares
Outstanding 28,839 28,839
Average Diluted Shares
Outstanding 29,265 29,265
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
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) $ 2,104 $ 2,578 $ 4,682
Interest Expense 4,358 - 4,358
Income Taxes 1,340 1,388 2,728
Depreciation and Amortization 5,462 (2,700) 2,762
--------- ----------- --------
EBITDA (Non-GAAP Measure) $ 13,264 $ 1,266 $14,530
========= =========== ========
- ----------------------------------------------------------------------
(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 Amazys acquisition.
(e) Operating income effect of adjustments (a) through (d).
(f) Adjustment (e) after tax using a 35% tax rate.
U.S. GAAP to Non-GAAP Measure Reconciliations and
Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA)
For the Six Months Ended June 30, 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 $ 72,803 $ 137 (a) $72,940
========= ========
Gross Profit Percent 61.5% 61.6%
2. Operating Expenses:
Selling and Marketing $ 27,974 $ (1,263)(b) $26,711
R&D and Engineering 18,325 (3,407)(b) 14,918
General and Administrative 11,559 (646)(b) 10,913
Restructuring 1,731 (1,731)(c) -
Integration 1,293 (1,293)(d) -
--------- --------
$ 60,882 $52,542
========= ========
3. Operating Income $ 11,921 $ 8,477 (e) $20,398
========= ========
4. Net Income From Continuing
Operations $ 2,321 $ 5,510 (f) $ 7,831
========= ========
5. Earnings From Continuing
Operations Per Share
Basic $ 0.08 $ 0.27
Diluted $ 0.08 $ 0.27
Average Basic Shares
Outstanding 28,751 28,751
Average Diluted Shares
Outstanding 29,119 29,119
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
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) $ 2,321 $ 5,510 $ 7,831
Interest Expense 8,970 - 8,970
Income Taxes 1,507 2,967 4,474
Depreciation and Amortization 10,923 (5,400) 5,523
--------- ----------- --------
EBITDA (Non-GAAP Measure) $ 23,721 $ 3,077 $26,798
========= =========== ========
- ----------------------------------------------------------------------
(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 Amazys 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