GRAND RAPIDS, Mich. -- November 6, 2007 -- X-Rite, Incorporated today announced its financial results for the third quarter ended September 29, 2007.
Third Quarter Highlights:
- Net sales from continuing operations totaled $55.6 million, an 8.6 percent increase over Q3 2006
- Adjusted operating income totaled $4.9 million, a 40.0 percent increase from the prior year period
- Achieved operating cash flows of $3.1 million and debt reduction of $3.9 million
- Amazys integration remains significantly ahead of timetable, with cost savings of $19.5 million achieved during the first five quarters of combined operations
- Sales backlog and order levels remained strong at the end of September 2007
- Announced and subsequently completed the acquisition of Pantone, Inc., the leading provider of color communication solutions and standards
The Company reported third quarter 2007 net sales from continuing operations of $55.6 million compared with $51.2 million in the year-earlier period. Gross margins were 55.5 percent, up from 40.6 percent in the third quarter of 2006. Operating income totaled $0.4 million and included $4.5 million in acquisition and restructuring related charges related to the Amazys acquisition ("acquisition and restructuring expenses"). The Company reported a net loss from continuing operations of $2.9 million or $0.10 per basic share, versus a net loss of $28.3 million or $0.99 per basic share for the same period in 2006.
Adjusted operating income, which excludes acquisition and restructuring expenses, was $4.9 million, and reflects a gross margin of 55.6 percent for the third quarter of 2007 versus $3.6 million and a gross margin of 60.4 percent for the same period in 2006. A reconciliation of GAAP earnings from continuing operations to adjusted earnings is included in this release.
"Overall sales in our core markets are in line with expectations, and the integration of the sales, engineering and general & administrative functions is on track," stated Thomas J. Vacchiano, Jr., Chief Executive Officer of X-Rite. "Our revenue performance in the third quarter was consistent with our targets as we continue to successfully integrate our product lines, develop exciting new products and expand our customer base."
"Our gross margins were below expectations by approximately 5.0 percent in the third quarter," stated Mary E. Chowning, Chief Financial Officer. "Approximately 2.6 percent of the gross margin decline in the third quarter was related to issues we encountered as we converted our core operating system and conformed operating practices in Europe. This conversion will allow us to standardize operating policies and practices in the operations area and move product production from Europe to the US more efficiently. Additionally, weak performance in our color services business and unfavorable product mix impacted our gross margins by approximately 2.8 percent. However, these items are not expected to impact gross margins significantly in the longer term."
In the first three quarters of 2007, net sales from continuing operations were $174.0 million, versus $107.2 million for the same period of 2006 on a stand-alone basis and $163.0 million after combining 2006 Amazys results with X-Rite on a nine-month pro forma basis. Gross margins were 59.4 percent versus 59.9 percent on a combined pro forma basis. Operating income for the first three quarters of 2007 totaled $12.1 million and included $12.9 million in acquisition and restructuring related charges. The Company reported net income of $7.0 million, or $0.24 per diluted share. The net loss from continuing operations was $0.5 million, or $0.02 per basic share.
Adjusted operating income, which excludes acquisition and restructuring expenses, was $25.0 million, reflects a gross margin of 59.5 percent for the first nine months of 2007 versus $9.9 million and a gross margin percent of 59.9 on a pro forma basis for the first nine months of 2006. Adjusted net income from continuing operations, which excludes acquisition and restructuring expenses, was $7.8 million, or $0.27 per diluted share.
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