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X-Rite announces improved Q2 results

Press release from the issuing company

Grand Rapids, Mich. – X-Rite, Incorporated today announced its financial results for the second quarter ended July 3, 2010.

Financial Highlights of today’s announcement:
- Second quarter net sales increased by 15.7 percent to $57.1 million compared to $49.4 million for the second quarter of fiscal 2009
- Second quarter Adjusted EBITDA increased $2.7 million, or 22.1 percent, to $14.9 million. Adjusted EBITDA was 26.1 percent of sales versus 24.8 percent of sales in the prior year second quarter
- Second quarter income from operations and net income improved by $5.7 million and $9.5 million to $8.2 million and $1.9 million, respectively, resulting in second quarter EPS of $0.02 per diluted share
- Strong year to date cash flow before financing of $18.6 million or 17.2 percent of sales
- Debt pay downs of $10.6 million for the quarter and $17 million to the end of the second quarter

Market Highlights of today’s announcement:
- Strong sales growth across all sectors and all regions
- New customer agreement signed with a leading North American Hardware Co-operative that is expected to increase iVue® market share and growth of the Retail sector.
- Introduced Pantone Matching Systems PLUS Series and the MA94 and MA96 Multi-Angle Spectrophotometer Industrial product lines

The Company’s strong sales growth was the result of recently launched product and marketing initiatives in combination with the global market recovery. Net earnings for the quarter were $1.9 million, or $0.02 per diluted share, compared to a net loss of $7.6 million, or $(0.10) per diluted share, for the same period of 2009.

Major new products introduced in the quarter were the new Pantone Matching Systems PLUS SERIES product lines and the MA94 and MA96 Multi-Angle Spectrophotometer. The new Pantone Matching Systems PLUS SERIES preserves all of the current colors of the Pantone Matching Systems, which it replaces, while adding a host of new colors, for greater design flexibility. The new Pantone Matching Systems PLUS SERIES product line incorporates X-Rite features such as the Color Checker Lighting Indicator, Color Checker Primer and Color Manager Software. The Multi-Angle products deliver cost effective reliable color measurement anywhere from the lab to the production line supporting formulation and quality control applications. The Company is receiving favorable customer acceptance of the new products.

The Company continued its organic product growth by announcing an agreement to install a minimum of 600 new color matching systems with a leading North American Hardware Co-operative over the next 12 months. This investment will replace an existing solution from an X-Rite competitor and supports the Co-Operative's paint department growth strategy.

"The positive momentum in our business this year continued into the second quarter with very solid growth in both sales and profitability," stated Thomas J. Vacchiano Jr., the Company's Chief Executive Officer. "This reflects the improving economic picture in many of our markets as well as success from our new sales, marketing, and product initiatives. One highlight here is the 26.1 percent growth of our Asia Pacific market. Furthering our commitment to the Asia Pacific region, the Company has recently announced Dr. Iris Mangelschots, a highly successful company sales and marketing leader, as President of X-Rite Asia Pacific region."

Through the Company's continued effective cost management and increased operating leverage, operating income for the second quarter increased to $8.2 million, or 14.4 percent of sales, in the period versus $2.5 million, or 5 percent of sales, in the prior year period. Supported by the combination of sales growth and the fiscal 2009 profit improvement actions, the Company reported Adjusted EBITDA for the second quarter of $14.9 million, or 26.1 percent of sales, an increase of $2.7 million or 22.1 percent over the second quarter of 2009.

The Company reported continued strong cash flows before financing activities of $18.6 million, or 17.2 percent of sales, for the six months ended July 3, 2010. Improved profitability and working capital metrics contributed to the Company's strong operating cash flows. As a result of the Company's operating cash flows an additional $10.6 million of first lien debt was paid in the quarter, for a total of $17.0 million in debt pay downs for the year. At quarter end net debt from secured credit facilities was reduced to $136.5 million.

Rajesh K. Shah, X-Rite's Chief Financial Officer, commented "I am pleased we are able to leverage the benefits of higher sales into significantly improved financial performance and cash flows. This has allowed the Company to continue to focus on accelerated debt pay downs while continuing to make the investments required to achieve our long-term growth plans. In addition to the $17.0 million in debt pay downs the Company achieved in the first six months I am also pleased to announce that we have already paid down an additional $9 million of first lien debt in the third quarter of 2010."

Vacchiano continued, "The Company is off to a good start this year. Our increased 2010 revenue and profitability reflect the strength and momentum of our product portfolio in a healthier global marketplace. This momentum should lead to double digit third quarter sales growth compared to the third quarter of last year. That said we continue to carefully monitor the economic climate, maintaining flexibility to manage our business opportunities accordingly."