GRANDVILLE, Mich.--Oct. 20, 2005-- The Company reported record third quarter 2005 net sales of $28.4 million, a 4.8 percent increase from the third quarter of last year. Gross margins were 64.0 percent compared to 65.0 percent in the third quarter of 2004. Operating income was $1.0 million versus $1.4 million in the third quarter of 2004. Operating income was 3.7 percent of sales in the third quarter of 2005, compared to 5.1 percent in the prior-year period. Net sales for the first three quarters of the year were $89.0 million versus $87.5 million in the prior year. Year-to-date gross margins were 64.3 percent and 65.0 percent for 2005 and 2004, respectively. Operating income for the first three quarters of 2005 was $5.4 million versus $7.9 million in 2004. "Performance turnaround in the Asia Pacific region and Digital Imaging business led to improved revenue growth in the third quarter. After a slow start in the first half of the year in Asia, our focus on execution in the marketplace has allowed us to return to over 25 percent revenue growth levels in the third quarter," stated Michael C. Ferrara, Chief Executive Officer of X-Rite. "Growth in our Digital Imaging business has also returned to expected levels, demonstrating that our two key new products, Pulse and DTP-70, have gained acceptance by our customers." Ferrara continued, "Our revenue growth was also supported by our Retail business, which grew 22 percent over the prior-year quarter and is poised for continued growth as we leverage our technology and continue to transition customer-specific solutions into mainline products. As a result of these successes and strength across all businesses, we remain confident in our 2005 revenue growth projections for our business." "During the third quarter, we focused cost control efforts on administrative expenses while continuing to make investments in infrastructure, marketing, business development, and R&D, which will support our long-term revenue growth and profitability goals," stated Mary E. Chowning, Chief Financial Officer. "These planned investments more than offset our administrative cost control measures and revenue increases during the quarter resulting in a small year-over-year decline in our operating income." Chowning continued, "Looking ahead to the fourth quarter, we are committed to the ongoing review of our cost structure and will make changes to enhance profitability while continuing to invest in selective opportunities for future revenue growth. We remain confident in our business decisions and we believe our investments continue to best position us for future growth." "Our Kaleidoscope home decor product in partnership with La-Z-Boy is an excellent example of the types of investments we are making on the product and market development front," added Ferrara. "This product stemmed from a customer need as well as leveraged our core competencies, and will offer a recurring revenue stream beginning in the first half of 2006." The Company reported net income in the third quarter of 2005 of $0.9 million, or 4 cents per share, versus $1.5 million, or 7 cents per share, in the third quarter of 2004. Net income for the first three quarters of 2005 totaled $3.6 million, or 17 cents per share, versus a net loss of $2.9 million, or (14) cents per share for the comparable period in 2004. The loss in 2004 was due to a non-cash charge of $8.6 million (41) cents per share related to Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS No. 150). Outlook The Company reaffirmed its guidance outlook for seven-to-ten percent revenue growth for 2005 and low double-digit long-term revenue growth. Ferrara explained, "Our foundation is in good shape - our Asia Pacific business has regrouped and is now growing as planned and our new Digital Imaging products are gaining traction with customers. We have a strong sales funnel for Q4 that includes significant orders from large customers. As a result, we are confident we can achieve our 2005 revenue target." Ferrara continued, "In 2006, we expect significant growth in the Retail business from the introduction of new products, incremental revenue from our new Intellitrax scanning systems in the Printing market based on Komori's order backlog and new revenue streams from our home decor offering and new products. We are confident in our ability to deliver our future revenue growth objectives."