Agfa is a worldwide leader of digital imaging systems, workflow solutions, hardware, software and supplies for the prepress, printing and publishing industries. As one of the most important suppliers in the industry, we wanted to compile their view of the economy, the distribution channel and other recent industry developments. Despite a weak economy, Agfa has maintained its market share in graphic film and has increased its market share significantly in digital plates and related equipment. Recent research by WhatTheyThink.com and CAP Ventures clearly show strong demand for prepress systems and solutions in the coming year. We are fortunate to present an in-depth interview with two top executives at Agfa - Denis Griff and Susan Wittner. Denis Griff is the Director of Business Development for Agfa Graphic Systems and is responsible for strategy and program development for Agfa’s distribution channel. He has over 20 years of experience in the printing industry in various sales and marketing management assignments for Agfa and previously with DuPont. Susan Wittner is the Director of Marketing for Agfa Graphic Systems. She joined Agfa from Enco/Hoechst in 1996. She previously worked in a variety of industries including paper, chemical and consulting. No one has been immune from the challenges of the economy and current events this year. Can you tell us how Agfa has performed during this time? Susan: This has been a challenging year for all. We at Agfa have focused our efforts on key digital solutions that our customers need to improve their productivity. In these areas, we have gained share and continue to see growth. The traditional products have seen a decline in 2001 and certainly the current economic situation has slowed print sales further. The Horizon Plan implemented by Agfa earlier this year -- can you update us on the overall progress and effect on the graphic arts division? Susan: The Horizon Plan is a smart business move to ensure that our global operations are in line with current sales and the outlook for our business. Most solid companies are implementing something along these lines to ensure preservation of shareholder value. So far, we have announced the closure of our Leed plate plant, yet at the same time we announced expansion in Asia. We have cut some overhead, but remain focused on serving the customer and have not affected our sales organization as many of our competitors have. We are also expanding. With our recent purchase of Autologic, we now have the most complete solution offering for the newspaper segment. We have reported increased market share for Agfa with CTP units and related services. Can you explain the reason for such success in this segment? How does a vendor like Agfa track market share figures? Susan: Our CTP solutions have been well received by the market, especially our Violet Galileo CTP system. We are pleased that Violet has emerged as the fastest growing CTP system. The number of suppliers jumping into this area has confirmed that. Our success in CTP comes from selling and taking responsibility for the total solution rather than just selling the ‘box.’ In addition, our award-winning Apogee workflow and award-winning Sherpa proofing really help our customers maximize their CTP ROI while minimizing their investment. Like the other vendors, we rely on reputed industry reports such as NPES, State Street and Vantage. We have read and reported on the attractive opportunity you have with Autologic and the selling of consumables to their (1900) clients. Explain the sales structure to move products to these customers? Susan: Autologic is a wholly owned subsidiary of Agfa with its corporate headquarters in Thousand Oaks, CA. Together, Agfa and Autologic’s newspaper sales teams are presenting our complete portfolio of solutions. We have found that our product lines are very complementary and our customer focus is similar. Delano -- can you provide an update on this effort and what the working product will look like here? Susan: Delano is our web customer service print management system that we developed with ImageWorks and QuebecorWorld. The product has been completely redesigned to align it with next generation workflow systems that Agfa has in development. This effort was key to ensuring that we deliver the best and most productive project management system. We are currently expanding our global beta testing with QuebecorWorld. The distribution channel has been the subject of much talk recently. Overall, how does Agfa view this method of delivery of their products? Denis: Dealers are an important part of Agfa’s strategy to sell and distribute products across the printing and publishing industry in the U.S. Many products provided by dealers are complimentary and help to support Agfa’s complete portfolio strategy in the majority of segments within the industry. Without a dealer network, it would be difficult for Agfa to support our base of 17,000 customers with the service levels they expect. The distribution channel is undergoing many changes due to economic and cost pressures. We’ve seen a number of business failures, mergers and acquisitions over the past few years. Agfa currently has about half the number of dealers today that we had about 2 years ago. Additional consolidation of the channel is expected and we’ll concentrate our selling efforts with a smaller group of companies, which should result in better service and representation for Agfa products. Your decision to end your relationship with Enovation - can you tell us why? Denis: Enovation is a newly formed distribution subsidiary company of FujiFilm, one of our largest direct competitors. While we had long-term business relationships with PrimeSource, Heartland and GSI, those companies no longer exist. Our intent was to try and establish a new relationship with Enovation and their management team. We were assured that Enovation would operate separately from Fuji and be a completely separate subsidiary focused on distribution. Unfortunately, the representations made by Enovation’s senior management team of their business strategy quickly changed with the appointment of a number of key personnel from Fuji. Jim Mullan, former President of PrimeSource was no longer in charge of Enovation but reporting to a new CEO from Fuji. Dan Mafeo, former National Sales Manager and President of Fuji’s Graphics Division, was named Executive Vice President of Enovation. The newly formed Enovation Board of Directors was predominantly made up of Fuji senior managers. We had serious doubts that Enovation would continue to fairly represent Agfa and support our existing customer base. What is the plan for getting products to these clients and have you been able to communicate with these end users? Denis: Our plans to convert existing Agfa customers purchasing from Enovation have gone very well. Most of our customers received phone calls and visits from their Agfa sales reps since November 13th, the day we notified Enovation that we would be terminating our business relationship. Our salespeople, customer service reps and other Agfa dealers have worked together to support the customers who were impacted and ensure no interruption in supply for these customers. Some say there is a need for financing and a further consolidation of the dealer channel. Does Agfa have plans for a more formal relationship with companies like Xpedx and Pitman via equity position or acquisition? Denis: We have no plans to acquire or take an equity position in our dealers. Regarding Pitman and Xpedx, we feel these dealers are well run and have some of the best management teams in the channel. While their recent business results may reflect some of the recent downturn in the industry, we’re confident that these dealers and many others will make needed changes to improve their overall business results. Further expected consolidation of the channel will help to strengthen and provide growth for dealers that are committed to Agfa for the long term. Finally, many expect a rebound next year, indeed many of our members have reported putting off major investments - not that they do not need the equipment, but just delaying their purchases. What's your outlook for next year? Susan: By all accounts, the first half of 2002 will be challenging as businesses carefully review all expenditures. However, we agree with several industry analysts who are expecting the leading print companies to continue to invest judiciously in areas that will increase their productivity and profitability. How can they afford not to invest? Our goal is to work closely with these leaders while totally supporting the struggling companies to ensure they ride out the current economic situation. Our extensive resources can help our customers to stay in the game and be positioned to continue their investment plans. Thank you Susan and Denis for speaking with us. Our members appreciate your time and wish you the best.