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Xeikon Reports Sluggish Earnings, Says Xerox Purchased No Equipment

Press release from the issuing company

Mortsel, Belgium – April 26, 2001 – Xeikon N.V. (Nasdaq: XEIK), the world’s leading supplier of production digital printing systems for a wide range of commercial and industrial printing applications, today reported revenues and earnings for the three-month period ended March 31, 2001. Total revenues for the first quarter of 2001 were $33.6 million, including $11.6 million from the black & white activities, compared with total revenues of $40.6 million for the same quarter last year. Revenues from equipment sales for the quarter were $12.6 million, or $8.8 million for color equipment and $3.8 million for black & white equipment. Non-equipment revenues for the period were $21 million, or $13.2 million from the color business and $7.8 million from the black & white business. This compares with equipment revenues of $19.0 million for the first quarter of last year, $14.3 million of which were contributed by sales of color equipment and $4.7 million by sales of black & white equipment. Non-equipment revenues in the first quarter of 2000 accounted for $21.6 million, including $14.0 million in color sales and $7.6 million in black & white sales. At constant exchange rates, color equipment sales to OEM partners decreased 80%, when compared to the same quarter last year. Color equipment sales under the Xeikon brand increased 34%, when compared to the same quarter last year. For the first quarter of 2001, gross profit was $6.6 million, compared with $10.9 million for the same quarter of 2000. Gross margin declined to 19.5% from 26.9%, mainly due to a poor product mix, the impact of fixed production costs on lower production volumes, and temporary commercial accommodations to customers related to the delay in full-scale CSP shipments. Operating loss for the period was $11.5 million, compared with an operating loss of $5.2 million for the same period last year. The Company posted a net loss for the quarter of $11.1 million, or a loss of $0.36 per basic and diluted share, compared with net loss of $5.4 million, or $0.19 per basic and diluted share, for the first quarter of 2000. Results for the quarter were also adversely affected by a year-over-year appreciation of seven percent of the U.S. dollar against the Euro, the Company’s functional currency. Alfons Buts, President and Chief Executive Officer, commented: “This was another difficult quarter for Xeikon. As forecasted, our color business was affected by the complete lack of equipment purchases by Xerox. However, excluding sales to Xerox, our color revenues grew seven percent compared to the same quarter last year. The significant increase of our Xeikon-branded business, both in equipment and in recurrent revenues, includes strong growth in Europe and in Japan.” During the quarter, the tuning of the CSP, Xeikon’s cut sheet press, continued as scheduled. Full-scale shipments of the CSP are expected to begin during the third quarter of 2001. Looking ahead, Mr. Buts added: “We continue the implementation of measures designed to bring us back to growth, including further developing our dedicated sales and support organizations in key markets such as the USA, Japan, France and Italy. Furthermore, our actions aimed at improving Xeikon-branded sales and margins include a strong focus on our flagship product, the DCP 500 D. The recently introduced entry level DCP 320 Dx, shipping as from March 2001, has already started to create growth again in the narrow web color range. We are also proceeding with the recently announced cost reduction measures aimed at bringing Xeikon back to profitability. We expect these measures to positively impact Xeikon’s results as of the third quarter 2001. In addition, as from the fourth quarter of 2001, we expect to achieve a 10% year-over-year reduction in total operating expenses.”

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