X-Rite Reports Record Revenue Growth and Substantial Improvement in Profitabilty
Press release from the issuing company
GRANDVILLE, Mich.--Feb. 5, 2004-- X-Rite, Incorporated today announced its financial results for the fourth quarter and fiscal year-ended January 3, 2004.
Fourth Quarter and Fiscal 2003 Highlights:
Record net sales for fourth quarter and full-year, increasing 24.7 percent and 19.0 percent, respectively.
Gross margins improved over one percent, to 65.2 percent in the fourth quarter and 63.8 percent for the full year.
Operating income increased 35.7 percent for the full year, while the Company continued to invest in R&D, engineering, sales and marketing.
Grew customer base, product offering and end-to-end solution capabilities through three acquisitions, which contributed $7.7 million to net sales for the full year.
The Company reported record fourth quarter 2003 net sales of $38.5 million, an increase of 24.7 percent from the fourth quarter of 2002. For the year ended January 3, 2004, net sales were $117.1 million, up 19.0 percent from the prior year. Gross margins for the fourth quarter and full-year 2003 were 65.2 percent and 63.8 percent, respectively. These margins compare favorably versus the prior year, up over 100 basis points for both the quarter and full year.
"This is a very important year for X-Rite - a turning point," said Michael C. Ferrara, Chief Executive Officer of X-Rite. "We have refocused the business on our core color markets, and they have delivered double digit operating income. We posted the highest level of annual sales in our history, and we have now experienced six successive quarters of year-over year revenue growth. We have a customer driven strategy in place and a culture focused on accountability."
Ferrara continued, "We are adapting our organization and its structure to enable us to deliver innovative technologies driven by our global partners. We have made three successful acquisitions this year. With Mary Chowning on-board as Chief Financial Officer, Jim Weaver's appointment as Vice President of Product Development & Marketing, and Joan Andrew's new role as Vice President, Global Sales joining other key leadership team members, we have management in place that possess the world-class skills required to run a successful business. We have the support of a strengthened Board of Directors, and are all focused on profitable growth."
Operating income was $4.0 million for the quarter or 10.3 percent of sales. Included in operating income during the fourth quarter of 2003 were the following items affecting comparability:
$2.6 million write-down of assets including a goodwill impairment charge related to the Coherix shape mapping technology. The Company will explore alternatives for this business, which could include a sale.
$1.0 million of costs related to severance agreements with the Company's former chief executive officer and chief financial officer; the full year impact for these severance agreements was $1.4 million.
For the fiscal year ending January 3, 2004, operating income was $8.7 million or 7.5% of sales, an increase of 35.7 percent over the prior year.
X-Rite's underlying fundamentals improved over 2002 in both the fourth quarter and the full year 2003. The Company attributed its strong year-over-year performance to better-than-plan results throughout the X-Rite organization. Ferrara added, "Revenue growth was driven by all major business units and all geographic markets. Innovation and attention to the customer throughout X-Rite resulted in our success in 2003. Thanks to our substantial efforts and our leading market positions, we expect to deliver double-digit revenue growth and higher operating income in 2004."
Mary E. Chowning, X-Rite's Vice President and Chief Financial Officer said, "2003 brought a new level of financial excellence to X-Rite. It was also a year of reviewing our portfolio. Our venture investments and our Coherix technology both required write-downs due to developments and decisions in the fourth quarter. X-Rite is now able to better focus its resources and capitalize on the wealth of growth opportunities we have in front of us in our core color related businesses."
The Company reported net income in the fourth quarter of 2003 of $2.2 million or 11 cents per diluted share. Full year 2003 net income was $5.5 million or 27 cents per diluted share. The Company's fourth quarter results include a write-down of $3.4 million or 16 cents per diluted share related to XR Ventures' investments. Although the Company continues to hold positions in several XR Ventures' portfolio companies, no future investments in the remaining portfolio companies will be made, except where necessary to protect any existing investments.
The Company's fourth quarter results include a charge recorded as interest expense for $0.7 million related to Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which requires that the value of certain long-term liabilities be adjusted quarterly based on the Company's current stock price. These liabilities relate to the repurchase agreements with the Company's founders, the value of which was previously reflected as temporary equity prior to the implementation of SFAS No. 150. In addition, fourth quarter results include an income tax benefit of $2.8 million, or 14 cents per share, resulting from the recognition of tax benefits associated with the 2002 and 2001 write-downs of XR Ventures' investments previously reserved. The ultimate realization of benefits related to the portfolio write-downs is dependent upon the execution of certain qualified income tax strategies.
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