Business News
X-RITE ANNOUNCES FOURTH QUARTER AND FISCAL YEAR 2008 FINANCIAL RESULTS
Tuesday 17. March 2009 - Company announces first quarter 2009 sales update
X-Rite, Incorporated (NASDAQ:XRIT) today announced its fourth quarter and full year 2008 financial results.
Highlights of todays announcement:
Fourth quarter and full year 2008 sales of $60.8 million and $261.5 million, respectively
Initial customer shipments and positive customer feedback for two new next generation product lines – the MA 98 with xDNA and the iVue Paint Matching System
Cost management actions yielded better than expected 2008 adjusted EBITDA of $16.0 million in the fourth quarter and $60.7 million for the full year
EBITDA margin of 26.3 percent for the fourth quarter and 23.2 percent for the full year of 2008
A stronger balance sheet evidenced by $50.8 million in cash and a reduced debt balance of $270.9 million at year end
The Company reported fourth quarter 2008 net sales of $60.8 million, including $8.6 million from Pantone, compared to fourth quarter 2007 pro forma net sales of $76.2 million, including $12.1 million from Pantone. Inclusive of a significant non-cash impairment charge, the Company reported a fourth quarter 2008 net loss of $64.7 million, or a loss of $1.02 per share.
In connection with its required annual goodwill and indefinite-lived intangible asset impairment testing, the Company recorded an impairment charge of $58.1 million or $0.92 per share, related to the 2007 acquisition of Pantone. This charge is a non-cash item and will not affect the Company’s cash flows, liquidity position or borrowing capacity under its credit facilities. Additionally, it is excluded from the Company’s financial results when evaluating financial covenants under its credit agreements.
Fourth quarter operating expenses totaled $28.6 million, excluding impairment charges and restructuring and other related charges. This represents a decrease of approximately $2.8 million compared to the third quarter of 2008.
Adjusted EBITDA, a non-GAAP financial measure, was $16.0 million in the fourth quarter or 26.3 percent of sales. The successful execution of cost reduction programs substantially mitigated the profit pressure associated with reduced sales levels. See the attached schedule for a reconciliation of GAAP results to adjusted EBITDA results.
“Our team made good progress on a number of fronts in the fourth quarter that resulted in a stronger balance sheet, exciting new product shipments, and important new customer projects,” said Thomas J. Vacchiano Jr., X-Rites CEO. “It is also important to note that Pantones brand, customer base and business model continue to be extremely valuable to X-Rite and will create a range of new opportunities for X-Rite by serving the complete value chain of many of our targeted markets.”
The Companys cash balance increased to $50.8 million at the end of the fourth quarter from $50.1 million at the end of its third quarter. Improvements in working capital management contributed to this increase. Additionally, the Company substantially reduced its debt balance from $417.3 million at the end of the third quarter 2008 to $270.9 million at year end. This is primarily due to the successful recapitalization of the Company which closed in October 2008 and the monetization of the founders life insurance policies.
Full Year Results
The Company reported 2008 sales of $261.5 million for the full year, a decline of 7.7 percent from 2007 on a pro forma comparable basis, including Pantone. The net loss for the year was $117.8 million, or a loss of $3.12 per share. Impairment, acquisition, and other related charges were key contributors to this reported net loss for the year.
Adjusted EBITDA, as defined in X-Rites lender agreements, was $60.7 million for 2008, or 23.2 percent of sales, and favorable to our preliminary estimate. See the attached schedule for a reconciliation of GAAP results to adjusted EBITDA results.
“Despite the difficult challenges we faced in 2008, we never lost focus, and we continued to advance the business in many areas,” commented Brad Freiburger, Interim CFO for X-Rite. “Following the October 2008 recapitalization, we have a stronger balance sheet with improved liquidity, upgraded credit ratings, new lender covenants that are better aligned with our business expectations, an operating model with a lower cost basis, strengthened working capital management practices, and an opportunity for significant profit leverage looking forward.”
Outlook
On January 8th the Company announced a significant profit improvement plan designed to better align its cost structure with 2009 sales expectations. This program includes more than $20 million of new profit improvement actions that have been identified with a large portion already having been executed. Based on a present assessment for the first quarter, the Company expects first quarter 2009 sales to be 25 percent to 30 percent lower than the same period last year. This is broadly consistent with Company expectations. The Company went on to say that it is adjusting the extent and timing of its cost management actions to align with the shifting demands brought about by the current recession to maintain a healthy safety margin above its lender covenants.
“Despite the current economic challenges, we remain positive about X-Rites opportunities,” said Vacchiano. “We have a strong market leadership position, great products and services, and the liquidity to manage through the current economic conditions. Through the remarkable efforts of our employees, unwavering support of our customers and partners, and the compelling nature of X-Rites business opportunity, we are well-positioned for the future.”