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X-Rite Reports Record Q4 Sales

Friday, February 17, 2006

Press release from the issuing company

GRANDVILLE, Mich.--Feb. 16, 2006-- X-Rite, Incorporated today announced its financial results for the fourth quarter and fiscal year ended December 31, 2005. Fourth Quarter and Fiscal Year Highlights: * Record fourth quarter net sales of $41.9 million, compared to $38.8 million in the fourth quarter of 2004 * Gross margins increased to 68.6 percent in the fourth quarter versus 63.1 percent in the fourth quarter of 2004 * Operating income of $10.3 million in Q4 2005 versus $7.9 million for Q4 2004, with continued strategic investments in infrastructure, engineering, sales and marketing * Retail business posts growth of 44.8 percent in the fourth quarter and 29.0 percent for the full year versus 2004 * Company moves forward with Amazys acquisition which was announced in January 2006 The Company reported record fourth quarter 2005 net sales of $41.9 million, an 8.2 percent increase from the fourth quarter of last year. Gross margins were 68.6 percent compared to 63.1 percent in the fourth quarter of 2004. Operating income was $10.3 million versus $7.9 million in the fourth quarter of 2004. Operating income was 24.5 percent of sales in the fourth quarter of 2005, compared to 20.5 percent in the prior-year period. Net sales for the full year were $130.9 million versus $126.2 million in the prior year, an increase of 3.7 percent. Full year gross margins were 65.7 percent and 64.4 percent for 2005 and 2004, respectively. Operating income for 2005 was $15.7 million versus $15.8 million in 2004. "Our revenue growth was driven by an outstanding performance in the Retail business which posted growth of 44.8 percent and 29.0 percent versus 2004 for the quarter and year, respectively. A disciplined focus on execution in the Asia marketplace has allowed us to recover from our slow start in this region in the first half of 2005. Revenue growth in Asia returned to double digit levels with 13.9 percent revenue growth levels in the second half of the year," stated Michael C. Ferrara, Chief Executive Officer of X-Rite. "Further, our successful launch of Intellitrax in the third quarter led to an increase in scanning system sales of over 35 percent in the fourth quarter versus the prior-year quarter." Ferrara continued, "While our full year revenue growth is lower than what we would like, we were able to shore up Asia and our Digital Imaging business and invest in our future growth. We stand ready to move forward with one of the most unique business combinations that our space has witnessed. The combination of X-Rite and Amazys will bring one of the deepest management teams, one of the strongest product sets, and two cultures of innovation together. We also believe it will position us to grow at a more rapid pace in the future than we could as a stand alone entity once our integration plans have had a chance to take hold." The Company reported net income in the fourth quarter of 2005 of $7.5 million, or 35 cents per diluted share, versus $15.3 million, or 72 cents per diluted share, in the fourth quarter of 2004. The fourth quarter 2004 results include the reversal of a non-cash charge of $8.9 million or 42 cents per diluted share related to Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS No. 150). Additionally, a loss on the sale of an investment of $0.5 million was included in net income in the fourth quarter of 2005. Net income for the full year of 2005 totaled $11.1 million, or 52 cents per diluted share, versus $12.4 million, or 59 cents per diluted share for 2004. "During the fourth quarter gross margins increased to 68.6 percent from 63.1 percent in the prior-year quarter through a combination of changes in the product mix, pricing discipline and enhanced absorption of overhead," stated Mary E. Chowning, Chief Financial Officer. "Our volume increase coupled with the improvement in gross margins more than offset increases in operating expenses and planned investments and allowed us to increase operating income in the fourth quarter by $2.4 million or 29.7 percent versus last year." Chowning continued, "The majority of our planned operating cost control efforts were not implemented due to the announced acquisition of Amazys in January 2006. As part of the Amazys / X-Rite integration, we have set clear cost reduction synergies including $16 million of annual operating expense reductions. Our total targeted synergies from the combination of $25 million annually will be fully implemented by the end of the third year." Outlook The Company will provide annual revenue growth and cost synergy targets that reflect the acquisition of Amazys following the closing of the transaction. The acquisition is expected to close in late Spring 2006.




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