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X-Rite Grows Top Line by 20% Posting Record Q1 Revenue

Press release from the issuing company

GRANDVILLE, Mich.--April 22, 2004-- X-Rite, Incorporated today announced its financial results for the first quarter ended April 3, 2004. First Quarter Highlights: Record net sales, up 20.8 percent over the first quarter of 2003. Gross margins were 63.6 percent. Seventh consecutive quarter of year-over-year sales growth. Operating income of $1.7 million with continued strong investments in engineering, sales & marketing. The Company reported record first quarter 2004 net sales of $28.5 million, an increase of 20.8 percent over the first quarter of last year. Gross margins were 63.6 percent. Operating income was $1.7 million for the quarter, compared with $1.6 million in the first quarter of 2003. Prior year results included a non-recurring expense reimbursement from a large customer of $1.0 million. Excluding 2003's expense reimbursement, first quarter 2004 operating income increased $1.1 million. Operating income was 6.0 percent of sales in the first quarter of 2004 as compared with 2.4 percent in the prior year period, excluding the 2003 expense reimbursement. "We finished 2003 on a strong note, and our momentum continues in 2004," said Michael C. Ferrara, Chief Executive Officer of X-Rite. "We recorded the highest level of first quarter sales in our history, and have now experienced seven successive quarters of year-over-year revenue growth. This success can be attributed to our customer-driven strategy and our culture of accountability." Ferrara continued, "Our focus on delivering innovative customer solutions is being received well by the markets we serve resulting in strong revenue growth. In a few weeks at the DRUPA 2004 tradeshow, an important quadrennial event for the printing industry held in Germany, we will introduce seven new color management tools that enable improved color results with minimal investment and maximum efficiency. We call this Streamlined Color Management(TM), and it exemplifies the types of customer-driven products you can expect from X-Rite in the future." "X-Rite continues to improve its underlying fundamentals," said Mary E. Chowning, Chief Financial Officer. "We are seeing revenue growth in all major color businesses and all geographic markets, and cost discipline efforts in the sales & marketing and general & administrative areas are beginning to show results." Affirming the Company's previously issued guidance, Ferrara added, "We remain confident in our ability to deliver double-digit revenue growth and higher operating income throughout 2004 versus 2003." The Company reported a net loss in the first quarter of 2004 of $3.8 million or 18 cents per share due to a non-cash charge of $4.9 million (23 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). SFAS No. 150 requires certain long-term liabilities be adjusted quarterly based on the Company's current stock price. These liabilities relate to the repurchase agreements with the Company's founders, the value of which was previously reflected as temporary equity prior to the implementation of SFAS No. 150.