X-Rite Reports Record Q4 and Year-End Revenues, with Significant Increase in Profitability
Press release from the issuing company
GRANDVILLE, Mich.--Feb. 3, 2005-- X-Rite, Incorporated, today announced its financial results for the fourth quarter and fiscal year-ended January 1, 2005.
Fourth Quarter and Fiscal 2004 Highlights:
Record fourth quarter and full-year sales revenues of $38.8 million and $126.2 million, respectively
Tenth consecutive quarter of year-over-year sales growth
Operating income doubled versus prior year fourth quarter
20 new products launched during fiscal 2004
Sales from new products increased to 36.7 percent of total revenue
The Company reported revenue of $38.8 million for the fourth quarter of 2004 compared to $38.5 million in the fourth quarter last year, an increase of 0.6 percent. Gross margins were 63.1 percent compared to 65.2 percent over the same period last year. Operating income in the fourth quarter increased 100 percent to $7.9 million compared to $4.0 million in the prior year. Net income for the quarter was $15.3 million.
For the fiscal year ended January 1, 2005, total revenue was $126.2 million, up 7.8 percent from the prior year. Gross margins were 64.4 percent versus 63.8 percent the previous year. Operating income for the fiscal year was $15.8 million, an 81.2 percent increase over 2003. Net income for the fiscal year-end 2004 was $12.4 million or 59 cents per diluted share versus net income of $5.5 million, or 27 cents per diluted share in 2003.
"Despite a few challenges and a very large comparative fourth quarter in last year, we are very pleased to report record Company sales for our fourth quarter and fiscal year-end 2004," said Michael C. Ferrara, Chief Executive Officer of X-Rite. "Our refocus and dedication to the color solutions market, continues to position the company for current and future success. To that regard, our core color business grew 10.1 percent in 2004, driven by significant investments in innovative color solutions and strong customer relationships. We also continued to excel in expanding our global reach last year, as revenues in our Asia Pacific business posted impressive revenue growth of over 30 percent in 2004. We believe we are well positioned to continue to leverage our leading market position for future growth."
"Even with the record level of sales in the fourth quarter, our growth was negatively impacted by delays in shipping some of our new products," continued Ferrara. "These products shipped in December and have been well received by our customers. We expect to see the revenue impact from these new products in the second half of 2005 as our large customers integrate these new products into their programs."
"Our gross margins improved in 2004 to 64.4 percent due to increased absorption and product mix changes," said Mary E. Chowning, X-Rite's Chief Financial Officer. "Our operating costs as a percentage of sales are also showing improvement as we focus on our cost structure and cost containment programs. We expect to continue this improvement in 2005."
Founders Stock Repurchase Agreement Update
In the fourth quarter, the Company terminated the Founders Stock Repurchase Agreements. "The termination of the Founders' Agreements will simplify our accounting and make our financial results easier to understand," continued Chowning. "We believe this decision was in line with the spirit of the recent regulatory changes as it will bring greater transparency to our financial results."
As a result of the termination of the Founders' Agreements, the Company reversed charges of approximately $8.9 million related to the increase in the value of the agreements that has occurred since the adoption on July 1, 2003, of Statement of Financial Accounting Standards No. 150 (SFAS No 150), "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." Upon reversal of these charges, the remaining $34.2 million, representing the fair value of the Redemption Agreements as of the adoption of SFAS No 150, was reclassified to shareholders' equity.
2005 Financial Outlook
"As we begin 2005, we remain encouraged by improving economic conditions, continued strong customer demand for our new products and our strengthening leadership positions in the markets we serve," stated Ferrara. "The key for our organic growth in 2005 and beyond will be the increasing contribution of new products, as well as the continued identification of future customer solutions driven from our commitment to research and development."
Ferrara continued, "In 2004, we successfully delivered on our promise to shareholders with the launch of 20 new and exciting products into the market. This was accomplished while still almost doubling our operating profitability and growing our core color business at double digit levels. In an effort to drive organic growth for years to come, we remain committed to investing 12 to 14 percent of sales in engineering and research and development. In terms of new products, we expect to launch 22 new products in 2005 and increase our percentage of sales contribution from new products to 38 percent. Given the initial success of our most recent product introductions, we expect to deliver double-digit revenue growth and higher levels of operating income in 2005."
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