Transcript Driving Business With Color - X-Rite

Investor Information
Presentation
Disclaimer
The materials contained in this announcement are neither an offer to purchase nor a solicitation of an offer to sell
shares of Amazys and is not a substitute for the prospectus and proxy statement and other documents that X-Rite
will file with the SEC. At the time the expected exchange offer is commenced, X-Rite will file exchange offer
materials and other documents with the U.S. Securities and Exchange Commission (“SEC”), including a prospectus in
an S-4 Registration Statement, and will also file exchange offer materials with the Swiss Takeover Board. The
exchange offer materials will contain important information, which should be read carefully before any decision is
made with respect to the exchange offer. The exchange offer materials and certain other offer documents will be
made available to all stockholders of Amazys at no expense to them. The exchange offer materials will also be
available for free at the SEC's website at www.sec.gov. Amazys stockholders are urged to read the relevant
exchange offer documents when they become available, as well as any amendments or supplements to
those documents, because they will contain important information that stockholders should consider
before making any decision regarding tendering their shares.
In addition, the issuance of X-Rite common stock in connection in connection with the proposed transaction will be
submitted to X-Rite shareholders for their consideration, and X-Rite will file with the SEC a proxy statement to be
used by X-Rite to solicit its shareholders' approval of the proposed issuance of stock, as well as other relevant
documents concerning the proposed transaction. The definitive proxy statement will be sent to the shareholders of XRite seeking their approval of the proposed issuance of stock. You will be able to obtain a free copy of the proxy
statement, as well as other filings containing information about X-Rite, at the SEC's Internet site
(http://www.sec.gov). Shareholders of X-Rite are urged to read the proxy statement regarding the
proposed issuance of stock and any other relevant documents filed with the SEC when they become
available, as well as any amendments or supplements to those documents, because they will contain
important information.
X-Rite and its directors, officers and other members of its management and employees also may be soliciting proxies
from X-Rite stockholders in connection with the vote of X-Rite shareholders referenced above. Information regarding
those participants will be included in Part III of the Company's Annual Report on Form 10-K for the 2005 fiscal year
of the company. Copies of this filing will be available at the SEC's website. Additional information regarding the
interests of those participants may be obtained by reading the proxy statement regarding the proposed transaction
when it becomes available.
Copies of the proxy statement and the SEC filings of X-Rite that will be incorporated by reference in the proxy
statement and the registration statement can also be obtained when available, without charge, by directing a request
to: Barb Linderman at [email protected].
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Disclaimer
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or
disapproved of these securities or passed upon the adequacy or accuracy of the information contained in this release.
Safe Harbor Statement
These materials contain forward-looking statements based on current expectations, estimates, forecasts and
projections about our business and the industry in which we operate and management’s beliefs and assumptions.
Forward-looking statements may be identified by the use of forward-looking terms such as “may,” “will,” “expects,”
“believes,” “anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” “model,” and “seeks” or the negative
of such terms or other variations on such terms or comparable terminology. These statements are not guarantees of
future performance and involve risks, uncertainties and assumptions that could cause actual outcomes and results to
differ materially. These risks and uncertainties include, but are not limited to, the risk that X-Rite’s and Amazys’
businesses will not be integrated successfully; the challenges of integration and restructuring associated with the
transaction or other acquisitions, and the challenges of achieving anticipated synergies; costs related to the
transaction; the failure of the X-Rite shareholders to approve the issuance of common stock in connection with the
transaction; the possibility that the market for the sale of certain products and services may not develop as
expected; X-Rite’s ability to manage its international operations; the risk that the process of reconciling Amazys
financial information to U.S. GAAP could result in changes to Amazys’ financial statements that adversely impact the
X-Rite’s pro forma estimates regarding the transaction; the existence or enactment of adverse U.S. and foreign
government regulation; the risk that the development of products and services may not proceed as planned; adverse
general domestic and international economic conditions including interest rate and currency exchange rate
fluctuations; the difficulty of efficiently managing the company’s cost structure for capital expenditures, materials
and overhead, as well as operating expenses such as wages and benefits due to the vertical integration of the
company’s manufacturing processes; the possibility that the transaction or other contemplated acquisitions may not
close; the impact of competitive products or technologies and competitive pricing pressures; potential business
disruptions; the economic downturn in the U.S. economy; and other risks that are described from time to time in XRite's Securities and Exchange Commission reports. Readers of this information are cautioned not to place undue
reliance on these forward-looking statements, since, while we believe the assumptions on which the forward-looking
statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to
be accurate. This cautionary statement is applicable to all forward-looking statements contained in these materials.
We undertake no obligation to update, amend or clarify forward-looking statements, whether as a result of new
information, future events or otherwise.
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Disclaimer
Non-GAAP Financial Measures
In addition to the results reported in accordance with generally accepted accounting principles (GAAP) within this
presentation, X-Rite may reference certain information, which is considered non-GAAP financial measures. Management
believes that these non-GAAP financial measures are useful to both management and its investors in their analysis of the
Company's underlying business and operating performance. Management also uses this information for operational
planning and decision-making purposes. Non-GAAP financial measures should not be considered a substitute for any
GAAP measure. Additionally, non-GAAP financial measures as presented by X-Rite may not be comparable to similarly
titled measures reported by other companies.
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Discussion Topics
Industry and Company Overview
Amazys Acquisition
Financial Information and Key Management
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Industry Overview
What is the Color Industry?
Solutions across workflows that:
Capture color data – sensor
Manage color information – software + database
Deliver enhanced value through cost reductions, quality
enhancements and speed to market
Color is everywhere – touches 90% of the physical world
Paint matching at Home Depot
Shade matching for teeth at dentist
Color quality for photographic prints
Color QC for plastics, textiles, etc.
Color consistency for WSJ
Paint matching in auto refinishing
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Overview of the Size of Color Markets
Universe
Large and Expanding
Consumer Color, Enterprise Color Management
Universe:
Where color market will
go as technology
becomes more affordable.
New and Emerging:
Companies with internal
color solutions or in color
market space as a noncompetitor.
Traditional:
Current color market
competitors
New and Emerging
$1 Billion–$1.5 Billion
6–8% growth
Traditional
$500M to $1 Billion
3–5% growth
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Industry Overview
Global Colormetrics Companies
($ in millions)
Headquarters
(Amazys)
2005 Sales
Market Share
USA
$130.9
13.1%
Switzerland
115.0
11.5
Switzerland
64.1
6.4
Japan
40.0
4.0
Germany
35.0
3.5
Total Top 5 Sales
Estimated Market Size
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$385.0
38.5%
$1,000.0
100.0%
Company Overview
Company Overview
1
Founded
Headquarters
Employees
Patents and applications
Products and SKUs
Customers
Enterprise Value2
FY2005 Revenue / EBITDA
Revenue by Product Line
1958
Grandville, MI
~650
120+
5,000+
4,000+
$250M
$130.9M / $21.9M
Other
14%
Graphic
Arts
41%
Retail
21%
1915
Regensdorf, Switzerland
~400
100+
3,000+
3,500+
$267M
$115.0M / $17.3M
Industrial
36%
Graphic
Arts
64%
Industrial
25%
Geographic Concentration
Asia
15%
Asia
21%
Americas
60%
Europe
25%
1
2
Americas
31%
Europe
49%
Based on exchange rate of CHF/USD 1.289:1.000.
Based on share price of $12.81 and $86.75 for X-Rite and Amazys, respectively.
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Geographic Overview
Revenue Breakdown1
X-Rite
12
Combined
Americas
60%
31%
47%
Europe
25%
49%
36%
Asia
15%
21%
18%
Orange: Distribution network of combined entity
Note: Dots represent locations of the combined entity.
1 As of 12/31/2004.
Amazys
Graphic Arts
► 2005 PF Revenues of $127.7mm (52% of total)
► Current Situation
► Largest and most competitive business
► Technology life cycle is 2 to 3 years for imaging and 5 to 7
years for printing
► Markets and Applications
► Imaging – Displays / Digital Printing / Photography /
Prepress and Creatives
► Traditional Printing – Commercial and Package
► Key Revenue Growth Drivers
Pro Forma 2005 Revenues
► Shift from analog to digital
Other
7.3%
► OEM / embedded solutions
Retail
10.9%
► Core Strategy
X-Rite
Graphic Arts
21.8%
► Capitalize on our market position and global capabilities to
deliver solutions in key markets that:
► Address growing demands for automated integrated color
control needs
► Span the entire work flow beginning with image creation/capture
through final production (e.g. printing)
► Reduce operating cost and increase productivity and quality
► Focus on large strategic partners
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Industrial
29.8%
Amazys
Graphic Arts
30.1%
Industrial
► 2005 PF Revenues of $73.4mm (30% of total)
► Current Situation
► 2nd Fastest growing business
► Majority of business outside North America
► Focused on growing business in China
► Highest gross margin, highest cost-to-serve
► Market Applications
► OEM Tier 1 automotive process control & QC
► Plastics, textiles QC, ink and dye formulation
Pro Forma 2005 Revenues
► Digital color management of global supply chain
Other
7.3%
► Key Revenue Growth Drivers
Retail
10.9%
► Globalization of customers and supply chains
► New product innovation
► Core Strategy
► Capitalize on our market position and global capabilities to
deliver solutions in key markets that:
► Address growing demands for automated integrated color control
needs
► Manage processes and data across specific work flow processing
from specification through production
► Reduce operating cost and increase productivity and quality
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Graphic
Arts
51.9%
Amazys
Industrial
16.7%
X-Rite
Industrial
13.2%
Retail
► 2005PF Revenues of $26.9mm (11% of total)
► Current Situation
► Fastest growing segment
► No close competitor
► Opportunity to extend Retail business into Europe
► Markets
► Paint matching
► Home décor
► Key Revenue Growth Drivers
Pro Forma 2005 Revenues
► DIY growth
► Consumer “nesting” trend and macro demographics
► Hyper-competitive retail markets
Retail
10.9%
Other
7.3%
► Core Strategy
► Capitalize on our strong North American market position
and global capabilities to deliver solutions in key markets
that:
► Address growing demands from retailers for product and POS
differentiation
► Reduce operating costs, enhance sales volumes and customer
experience
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Industrial
29.8%
Graphic
Arts
51.9%
Other Businesses
► 2005PF Revenues of $18.0mm (7% of total)
► Medical/Dental (2% of Revenue)
► Existing shade taking device is industry standard
► New dental product planned for 2006 global release
► Future upsides
► Light (5% of Revenue)
► Labsphere and Optronik businesses are non-core
Pro Forma 2005 Revenues
Other Businesses Revenue
Light
5.1%
$25.0
$19.7
$20.0
$19.1
$19.6
$18.3
$18.0
$15.0
Retail
10.9%
$10.0
$5.0
Industrial
29.8%
$0.0
2001
2002
2003
2004
2005
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Dental
2.2%
Graphic
Arts
51.9%
Research and Development
► Investment in engineering will continue to drive future growth
X-Rite
$150.0
Amazys
16.9%
12.0%
$120.0
12.6%
12.5%
$126.2
12.5%
$130.9
18.0%
$150.0
15.0%
$120.0
18.0%
13.2%
13.0%
12.4%
12.1%
12.0%
$90.0
$90.0
$91.7
$98.5
$117.1
9.0%
$60.0
$87.1
$60.0
6.0%
$30.0
$0.0
2001
2002
X-Rite Revenues
2003
2004
10.8%
$115.0
3.0%
$30.0
0.0%
$0.0
2005
6.0%
3.0%
0.0%
2002
Am azys Revenues
2003
2004
2005
Am azys R&D % of Revenues
X-Rite Key Metric
% of Revenue from New Products
Patents and Applications
X-Rite
129
2001
Low 20s%
Amazys
102
2003
Low 30s%
Total
231
2005
42%
2007E
45%+
17
12.0%
9.0%
$72.1
$67.1
2001
X-Rite R&D % of Revenues
$106.1
15.0%
Amazys Acquisition
Strategic Rationale
Creates a market leader in the color management industry
Economies of scale expected to result in high synergy potential achievable over
three years
Combined annual operational cost savings potential of $25 million in year three
Gross margin target of 63 percent in year three
EPS accretive expected in year two
Accelerated technology innovation expected
Pooling of R&D resources may accelerate innovation rates
Extended market opportunity
Pooling of resources helps the company to address new markets and
geographies
One of the strongest talent pools in the industry
The acquisition creates a market leader, enhances shareholder value
and sets the foundation for long-term growth
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Excellent Strategic Fit
X-Rite
Amazys
•
Strong presence in Americas and Asia
• Strong presence in Europe
•
Leader in the automotive, retail and
• Leader in graphic arts, visual evaluation
•
pressroom markets
solutions and web-based color
Strong strategic partnerships
communication
•
Xerox, Komori
• Strong strategic partnerships
•
Demonstrated growth and profitability
• Heidelberg, HP
•
Manufacturing and operational strengths
• Demonstrated growth and profitability
•
High growth in retail business
• Complementary technological innovation
• High growth in digital imaging business
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Combined Company Highlights
Industry leader in key markets
Diversified geographic revenue streams
Diversified customer and market revenue streams
One customer above 5 percent of revenues
Large patent portfolio
200+ existing patents and applications
Straightforward business model
Technology investments drive growth – estimated at 10 to 12 percent annually going
forward
High margin products expected to be derived from key platforms
Economic synergies are easily identified
Expect modest capital expenditure requirements
Expect rapid debt repayment in two to five years, driving down leverage
significantly
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Estimated Synergies
Overview
Synergies primarily based on cost
savings
Synergies Summary by Cost Area
Annual Synergies Projected by year 3
In-depth analysis of synergies has
been performed
Manufacturing

$9.0 m
Planned restructuring charge of
$20 million in year one
Selling & Marketing
$5.5 m
Total estimated annual cost
synergies of $25 million by year
three
Engineering & R&D
$5.0 m
General & Admin
$5.5 m

Total Annual Synergies
NPV of synergies and restructuring
charge is approximately 75 CHF per
share
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$25.0 m
Integration Status
► Leadership teams are working closely and are aligned on all integration
matters
► Integration management is in place and is operating in high gear postannouncement
► Synergy targets are well defined and plans are in place to timely capture the
targets
► Significant progress has been made in product integration planning. Much of
the learning and process will be duplicated with the other integration teams
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Integration Milestones
February
March
April
May
June
July
August
PHASE 2
Integration Planning
June 30
Test readiness; set up
command centers in
Grandville/Regensdorf
PHASE 3
X-Rite / Amazys
Launch
PHASE 4
Integration Plans Executed
June 30
May 15
August 31
June 30
X-Rite / Amazys
2006 Financial Plan
Start Employee
Meetings
May 15
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June 15
August 10
X-Rite / Amazys 3-Year
Strategic Planning
Commences
Transaction Summary
Business combination, supported by both Boards of Directors
Offer to Amazys shareholders
Offer price per share: CHF 77 plus 2.11 X-Rite shares
Total estimated purchase price $300 million
Conditions of the offer
X-Rite shareholder approval
70% acceptance level from Amazys shareholders
Regulatory approvals
Listing on Nasdaq with dual listing on Swiss Exchange
Financing
Acquisition financing package of $220 million committed by Goldman Sachs
Board Composition
Nine member Board, comprised of six members from X-Rite and three members from
Amazys.
Management team
Senior Management team comprised of talent from both companies
Michael C. Ferrara will remain CEO, Thomas J. Vacchiano, Jr. will be named President and
COO, Mary E. Chowning will remain CFO, and Dr. Francis Lamy will be named CTO.
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Purchase Price Summary
1
Total number of Amazys shares
3.4 m
Fixed exchange rate
.8070
Estimated Value of X-Rite share
$13.00
Cash portion of consideration (77 CHF per share)
$206 m
Equity portion of consideration (2.11 X-Rite shares per share)
$94 m
Estimated acquisition related costs
$18 m
Total
$318 m
$40 million revolver.
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Goldman Sachs Debt Structure
Revolver (working capital and acquisitions)
$40 m
First Lien Term loan (Amazys purchase)
$120 m
Second Lien Term loan (Amazys purchase)
$60 m
Total
$220 m
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Sources and Uses at Closing
($ in millions)
Uses
Sources
Cash
Revolver
$44.0
0.0
1st Lien Term Loan
120.0
2nd Lien Term Loan
60.0
New X-Rite Equity
94.0
Total Sources of Funds
Cash on Balance Sheet
$10.0
Purchase Amazys Equity
290.0
Estimated Fees and Expenses
$318.0
Total Uses of Funds
► $40 m revolver available for working capital needs and small acquisitions
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18.0
$318.0
Timetable
Indicative timetable for public tender offer
January 31
Pre-Announcement
March 24
Offer prospectus published
May 5
S-4 Filing Effective
Initial offer period closes
May 23
Additional acceptance period closes
June 13
X-Rite shareholder meeting
June 30
Settlement
July 5
Delisting of Amazys shares on Swiss Exchange
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Fall 2006
Historical Financials
and Key Management
X-Rite and Amazys – Historical Revenues and EBITDA
Revenues
($ in millions)
Amazys
X-Rite
9% CAGR
$150.0
$117.1
$120.0
$91.7
$90.0
$60.0
$30.0
$19.7
$11.2
$98.5
$19.1
$14.7
$19.6
$23.0
$41.1
$41.7
2001
2002
$126.2
$130.9
$18.3
$18.0
$20.9
$26.9
$19.6
$150.0
14% CAGR
$120.0
$17.9
$87.1
$90.0
$32.2
$27.2
$67.1
$32.4
$60.0
$54.8
$52.4
$0.0
$41.0
$40.5
$72.1
$40.4
$30.5
$32.1
$36.6
$40.1
$46.7
2001
2002
2003
$30.0
$53.6
$115.0
$106.1
$65.6
$74.0
2004
2005
$0.0
Graphic Arts
2003
Industrial
2004
Retail
2005
Other
Graphic Arts
Industrial
EBITDA
Amazys
X-Rite
$40.0
17.3%
$40.0
20.0%
20.0%
16.7%
16.6%
14.8%
$30.0
12.2%
$21.9
10.0%
$20.0
15.0%
$30.0
10.0%
$20.0
13.8%
$17.4
8.6%
$17.7
$17.3
10.0%
$9.9
$0.0
2002
15.0%
$13.2
$9.1
2001
15.0%
$21.9
$12.0
$10.0
15.1%
2003
2004
5.0%
$10.0
0.0%
$0.0
0.0%
2001
2005
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5.0%
$5.8
2002
2003
2004
2005
Key Management Team Members
Michael C. Ferrara, CEO
Michael has served as CEO of X-Rite since June 2001. Prior to that, he was CEO of Marine Optical
Group, a Boston-based worldwide design and marketing company in the eyewear business, and N.I.
World Trade, an international marketing and distribution company. Following close, Michael will
remain CEO.
Thomas J. Vacchiano, Jr., President & COO
Tom is currently President and CEO of Amazys. Before joining Amazys as its’ CEO in late
2000, Tom was President and CEO of Xerox Engineering Systems (XES), a $400 million
subsidiary of Xerox and a part of Xerox New Enterprises. Following close, Tom will assume the
role of President & COO of the combined company, and is the intended successor of Michael
C. Ferrara, subject to approval by the Board of Directors.
Mary E. Chowning, CFO
Mary joined X-Rite in 2003 as CFO. Previously, she was a co-founder, General Partner and CFO for
the Wind River Environmental Companies, a large non-hazardous residential and commercial liquid
waste hauler. Prior to Wind River, she spent fourteen years in public accounting with Arthur
Andersen and is a Certified Public Accountant. Following close, Mary will remain the CFO.
Dr. Francis Lamy, CTO
Francis is currently Executive VP and CTO for Amazys, managing the company's strategy, innovation
and business development functions. Francis architected and executed Amazys' transformation from
an instrument manufacturer to a solution provider. Following close, he will assume the role of CTO of
the combined company.
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