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X-Rite Reports Net Loss of $28.3 million

Wednesday, November 08, 2006

Press release from the issuing company

GRANDVILLE, Mich.--X-Rite, Incorporated announced its financial results for the third quarter ended September 30, 2006. Third Quarter Highlights: * Third quarter combined net sales of $54.2 million including Amazys activity from July 5, 2006 * Amazys acquisition integration plan and synergies on target through third quarter * CEO succession plan successfully completed with Tom Vacchiano assuming CEO duties on October 1, 2006 * Sale of headquarters real estate to Target Corporation for $14 million announced * Imaging & Media and Industrial category product integration plans launched * Successful launch of new embedded color management solution in Hewlett Packard's DesignJet Z printer line The Company reported third quarter 2006 net sales of $54.2 million, versus pre-acquisition sales of $28.4 million for the third quarter of last year. Gross margins were 41.3 percent and included $10.1 million of restructuring and acquisition related charges. Operating losses for the third quarter totaled $29.5 million and included $33.6 million of restructuring and acquisition related charges. The Company reported a net loss in the third quarter of 2006 of $28.3 million, or 99 cents per basic share. Operating income, excluding restructuring and acquisition related charges ("acquisition and restructuring expenses"), for the third quarter was $4.1 million, reflecting gross margins of 60.1 percent. The net loss, excluding acquisition and restructuring expenses, was $6.4 million, or 22 cents per basic share. A reconciliation of the reported loss to the loss excluding acquisition and restructuring expenses is provided elsewhere in this release. "Our first quarter of combined operations went as planned with revenues that met our expectations. Additionally, we had a good start on achieving our planned cost synergies," stated Thomas J. Vacchiano, Jr., Chief Executive Officer of X-Rite. "The quality of our integration planning before the closing provided a strong foundation for our first quarter as a combined company." "Operating income, excluding acquisition and restructuring expenses, as a percent of sales more than doubled to 7.7 percent for the third quarter of 2006 versus 3.7 percent in the prior year quarter reflecting the impact of the cost synergies we are implementing," stated Mary E. Chowning, Chief Financial Officer of X-Rite. "Additionally, we generated $13.2 million of cash flow from operations during the third quarter which was used to fund capital expenditures, interest costs and reduce our net debt position. In addition, our EBITDA (earnings before interest, taxes, depreciation and amortization) was $7.2 million or 13.4 percent of sales for the third quarter, reflecting operating income, excluding acquisition and restructuring expenses, of $4.1 million and depreciation and amortization of approximately $3.1 million." Amazys Transaction X-Rite launched its formal tender offer for all Amazys shares on March 24, 2006. The consideration offered for each Amazys share in the tender offer was cash of 77 CHF plus 2.11 shares of X-Rite common stock. On July 5, 2006, the Company completed the tender offer for 3,422,492 shares of Amazys, or 99.7 percent of the outstanding shares, at a total value of approximately $295 million. Outlook As previously announced, the Company expects revenue growth on a proforma basis to be flat for the near term. Preliminary estimates for full year 2007 revenue growth is in the 4 percent to 6 percent range. "We are enthusiastic about our new products that are launching in the second half of 2006. PlateScope, Matchstik 1.1 and the HP DesignJet Z embedded sensor are being well received in the marketplace," said Vacchiano. "At the same time, our integration of Amazys is in the execution stage and moving along as planned. "As part of the Amazys integration, we have the opportunity to recognize significant annual cost synergies totaling $25 million by the end of the third year following the close," stated Chowning. "Our synergy plans are on target and synergies from operating expense costs are expected to be $16 million annually, with $9 million of additional reductions related to manufacturing."




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