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X-Rite Reports Record Quarterly Net Sales

Press release from the issuing company

GRANDVILLE, Mich.-Jan. 30, 2003-- X-Rite, Incorporated, a leading global provider of precision measurement devices, systems and processes that measure color, light and shape, today announced its financial results for the fourth quarter and year-ended December 28, 2002. The Company reported record fourth quarter net sales of $30.9 million, compared to last year's net sales of $20.1 million in the same period. Operating income for the quarter was $4.8 million, compared to an operating loss of $1.5 million in the prior year. The Company reported net income for the quarter of $3.7 million, or 18 cents per share, compared to a net loss of $2.7 million, or 12 cents per share for the same period last year. For the year-ended December 28, 2002, net sales were $98.5 million, compared to net sales of $91.7 million for the same period last year. Operating income for the year was $6.4 million, an increase from $2.1 million over the prior year. XR Ventures' investment write-downs and a goodwill impairment charge resulted in a net loss for the year of $9.4 million, or 47 cents per share, compared with net income of $1.9 million, or 9 cents per share for the prior year. The Company recorded a charge for goodwill impairment of $7.6 million in connection with its adoption of Statement of Financial Accounting Standards 142 ("SFAS 142") effective as of December 30, 2001. This charge was a result of transitional tests of potential impairment of the recorded value of goodwill that were completed in the fourth quarter by an independent third party. Impairment, as defined by SFAS 142, is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. SFAS 142 requires that the charge be treated as a change in accounting and be recorded in the first quarter, as a cumulative effect change in accounting. "Our fourth quarter net sales were the best in the Company's history, an important achievement given the business environment we all faced in 2002," said Rich Cook, chief executive officer of X-Rite, Incorporated. "Many factors contributed to our success, including increased customer focus, improved accountability, product development initiatives and strategic partnerships with key players in our marketplaces. We enjoy the support of many global customers who believe in our products and the value they offer. We believe an economic recovery in small equipment capital spending will benefit us in 2003 and promote a healthier business environment in our markets." Here are a few important highlights from 2002 that impacted our improved operating performance. * We began shipping the ColorDesigner system for retail paint matching during the first quarter. This software product was developed for home centers, paint retailers, mass merchants, hardware cooperatives and their customers to simplify design and color selection. With standard features like Color Harmony, Paint My Room and Paint Problem Solver, we anticipate continued growth for this product line. * The Wall Street Journal confirmed our belief that accurate color is important to the newspaper industry. Dow Jones has standardized its North American printing operation using X-Rite color scanning systems. Other major newspapers that have adopted our color quality control solutions are The Dallas Morning News, The Orlando Sentinel, Cox Newspapers, The Des Moines Register, Interweb Montreal, The Washington Times and Le Republicain Lorrain. We believe these systems will continue to be the "products of choice" for newspaper print production facilities worldwide. * Other Print and Imaging customers like DuPont Imaging Technologies and customers like Hallmark Cards have helped establish our leadership in these markets. With renewed projects and commitments from customers like these, we are encouraged that our Print and Imaging products will provide good growth in the future. * X-Rite was a pioneer in the development of portable instrumentation for color measurement instruments. Now, with the development and marketing of our new benchtop instrument, we have broadened our market reach by providing laboratory measurement capabilities to many industries including inks, cosmetics, paints and plastics. * Today, we have sold more X-Rite dental instruments than the combined total of all competitor instruments in this category. Over this past year, the ShadeVision product line has been widely adopted by U.S. dental laboratories. Building on this success, we will increase our focus on the individual dentist population, as well as continuing to develop global opportunities. In addition, we are pleased to report that we have recently signed a new, multi-year distribution agreement with our distribution partner, Sullivan Schein, confirming their commitment to this product. * X-Rite's shape mapping products are beginning to show promise in the automotive industry fueling the current trend in next generation manufacturing facilities. These products are capital intensive and industry acceptance is slow. We are focusing on the automotive industry in North America. Currently, Chrysler, General Motors and Delphi Automotive are showing clear signs of early adoption of this progressive technology. * Opening our new China headquarters in Shanghai was an important step in our focus to bring the most advanced color measurement and management solutions, training and after-sales service to China. Our Coating business is well positioned to take strategic advantage in automotive, textile and manufacturing enterprises in China. Cook concluded, "At the end of the day, it's all about execution - getting the orders, engineering the product and shipping to satisfied customers. Our leadership is driven and our work teams on task. As the economy improves, I believe X-Rite will continue to deliver improved growth and profitability to our stakeholders in 2003 and beyond."