Grand Rapids, Mich. - X-Rite, Incorporated today announced its financial results for the third quarter ended October 2, 2010.
- Third quarter net sales of $55.4 million, an increase of $9.8 million, or 21.4 percent, compared to $45.6 million for the third quarter of fiscal 2009
- Third quarter Adjusted EBITDA of $13.3 million, an increase of $2.6 million, or 25.0 percent, compared to $10.7 million for the third quarter of fiscal 2009. Adjusted EBITDA was 24.0 percent of sales versus 23.3 percent of sales in the prior year third quarter
- Third quarter income from operations and net loss were $6.9 million and ($0.1) million compared to the prior year third quarter of $1.6 million and ($9.0) million, respectively
- Strong year to date cash flow before financing of $21.3 million or 13.0 percent of sales
- Debt pay downs of $19.2 million for the quarter and $36.2 million year to date, including the pay off of the Company's Second Lien Credit Facility
- X-Rite announced a new partnership with Autodesk, Inc. offering X-Rite products globally as part of a next generation design solution
- The Company's intellectual property portfolio was strengthened with a patent granted for non-contact color measurement technology used in a broad range of products in our Industrial and Retail product lines
The Company's sales increase was paced by a strong European growth of 29.3 percent in the quarter. The sales increase in Europe was accompanied by sales growth in the Industrial and Standards product lines in North America and the Imaging and Media product lines in Asia Pacific. Stronger profitability from higher sales leverage enabled the Company to report improved financial performance while also supporting continued investment in the Company's product and market initiatives. The Company reported near breakeven results with a net loss in the quarter of $0.1 million, or $(0.00) per diluted share, compared to a net loss of $9.0 million, or $(0.12) per diluted share, for the same quarter of 2009.
In the quarter the Company announced a key strategic alliance with Autodesk. The Company has partnered with Autodesk to combine X-Rite's MA98 hardware and color rendering software with the Autodesk Showcase Professional 2011 3D visualization software. This combination will provide industrial designers a new way to more accurately render the complex highlights of effect paints, such as metallic flake, in their digital prototypes.
Additionally, the Company recently received a patent that protects important proprietary technology in non-contact color measurement that has widespread applications across many markets and products including the VeriColor Spectro, MatchRite iVue, and VS450 instruments. The VeriColor Spectro can read colors accurately in an industrial shop floor environment under conditions of fluctuating temperatures, vibration, high humidity, and variable lighting. The VS450 can measure test surfaces of materials such as powders, liquids, pastes and suede leather for multiple industries where color measurement previously was not practical, such as food and cosmetics. The MatchRite iVue measures colors at a distance for the retail and design industries in either a horizontal or vertical position on larger or odd shaped items, as well as curved surfaces such as lamps and bowls.
Thomas J. Vacchiano Jr., the Company's Chief Executive Officer, stated, "The continued year over year double digit sales growth in the third quarter reflects the Company's increasingly successful new sales, marketing, and product initiatives, along with improved market conditions. Of particular note is the 29.3 percent growth of our European region in the third quarter. The growth in Europe was driven by multiple factors including strong sales of two new products (Capsure and Pantone Matching System Plus), as well as increasing demand in the printing sector."
Supported by the combination of strong sales growth and cost controls, operating income for the third quarter improved to $6.9 million or 12.5 percent of sales in the period versus $1.6 million, or 3.5 percent of sales in the prior year period. Adjusted EBITDA for the third quarter improved to $13.3 million, or 24.0 percent of sales, an increase of $2.6 million or 25.0 percent over the third quarter of 2009.
The Company reported cash flows before financing activities of $21.3 million, or 13.0 percent of sales, for the nine months ended October 2, 2010. As a result of the Company's strong operating cash flows, improved revenue and financial performance, the Company was able to amend its debt agreements in the third quarter to permit repayment of all outstanding obligations under the Second Lien Credit and Guaranty Agreement and make quarterly interest payments in cash on the outstanding shares of the Company's Series A Preferred Stock. Consequently in the third quarter, the Company paid down $9.0 million of First Lien debt and $26.4 million in Second Lien debt, respectively, with cash flows from operations, $9.9 million of cash reserves, and $16.5 million in borrowings from its revolving line of credit. Total debt payments for the quarter and year to date October 2, 2010 results were $19.2 million and $36.2 million. At quarter end net debt from secured credit facilities was reduced to $132.6 million from $154.5 million at the year-end January 2, 2010.
Rajesh K. Shah, X-Rite's Chief Financial Officer, commented, "As our Company's revenue and profitability improve, we continue to leverage our financial performance into an improved capital structure. The pay down of our Second Lien Credit Facility which carried an interest rate of 14.375 percent will result in estimated annual cash savings of $2.8 million."
Vacchiano closed by saying, "The continued improvement in revenue and profitability are a result of the Company's initiatives as well as improved market conditions. We believe that fourth quarter 2010 sales growth will be in the double digits compared to the fourth quarter of last year. Looking ahead to 2011, while economic conditions remain unclear, we are enthusiastic about the potential for attractive adoption rates of our new products into existing and new markets."