Business News
X-RITE REPORTS SECOND QUARTER RESULTS
Monday 11. August 2008 - Company reports $73.5 million in revenue, 23% adjusted EBITDA margin, and $28 million cash balance
X-Rite, Incorporated (NASDAQ: XRIT) today announced its financial results for the quarter ended June 28, 2008.
Second Quarter Highlights
Net sales totaled $73.5 million, a 1.7 percent increase over the second quarter of 2007
on a pro forma combined basis
Operating expenses declined in the second quarter by 7.7 percent versus first quarter
2008 excluding restructuring and other related charges as the companys restructuring
plan has begun to impact its results
Adjusted EBITDA increased 30.5 percent on a sequential basis to $17.2 million
The Companys cash position increased $9.9 million during the quarter to $28.3 million
Significant progress was made with interested parties regarding refinancing efforts and an amended credit agreement
The Company reported second quarter 2008 net sales of $73.5 million, including $11.6 million from Pantone, compared with $72.3 million in the second quarter of 2007 on a pro forma basis with the results of Pantone included in both periods. Adjusted gross margin was 57.7 percent in the quarter, which excludes certain Pantone acquisition related purchase price adjustments and restructuring and other related charges totaling $4.0 million. This compares to the first quarter 2008 adjusted gross margin of 59.8 percent.
Operating expenses totaling $33.4 million, excluding restructuring and other related charges, were down by approximately $2.8 million compared to first quarter 2008 on a comparable basis. This reduction was influenced by the implementation of the April 2008 restructuring plan.
Adjusted EBITDA, a non-GAAP financial metric was $17.2 million in the second quarter of 2008 or 23.4 percent of net sales for the combined business. This compares to adjusted EBITDA of $13.2 million in the first quarter of 2008 and $18.9 million in the fourth quarter of 2007.
Operating income was $0.5 million for the second quarter despite restructuring and other related charges of $4.6 million. After interest expense of $11.2 million and booked income taxes of $10.3 million (of which $8.5 million is a non cash reserve regarding the Companys tax liabilities), a net loss of $20.9 million was reported in the quarter. A reconciliation of its net loss in the quarter and year-to-date to adjusted EBITDA is included in Exhibit 3.
The Companys cash balance increased from $18.4 million at the end of the first quarter of 2008 to $28.3 million at the end of the second quarter. The Company had no additional borrowings under its credit facilities in the period. Pursuant to GAAP, all debt with the Companys first and second lien lenders will continue to be reported as a current liability until such time as its credit agreements are amended.
“Given the general market conditions and specific challenges X-Rite has been facing, we are pleased with the progress reflected in our financial results for the second quarter,” said Thomas J. Vacchiano Jr., Chief Executive Officer for X-Rite. “The revenue and EBITDA growth, along with the strong ending cash balance are clearly a result of the value X-Rite delivers to its customers and the extraordinary efforts of our employee team.”
David A. Rawden, X-Rites interim Chief Financial Officer commented, “Multiple cross functional initiatives were put in action during the quarter and resulted in significant improvement in our working capital management. Key drivers for this improvement came from better receivables, payables and inventory management. The X-Rite business is operating effectively and all lender interest and principal commitments are being met.”
2008 Performance Guidance
2007 proforma combined sales for X-Rite and Pantone were $283 million. Given general market conditions, the Company is maintaining its previous outlook for total 2008 sales to range between $272 million and $286 million.
On April 3, 2008, the company announced and initiated a restructuring plan to achieve cost savings of $18 million versus its original 2008 budget over the remaining three quarters of the year. The Company is on track through the second quarter and currently expects to achieve these cost savings by year end.
The Company maintains its most recent outlook for adjusted EBITDA in the range of $60-68 million. For now, the Companys guidance for EBITDA excludes any potential costs related to changes in the Companys lending agreements or capital structure, which have not been determined.
“We recognize that X-Rites stakeholders are awaiting an announcement regarding the Companys capital structure and lender agreements” said Mr. Vacchiano. “While taking more time than expected due to the complexity of the original credit structure, the Company and its advisors anticipate a positive resolution.”