Scitex Announces Q1 Loss on 3.1% Revenue Increase
Tuesday, May 13, 2003
TEL AVIV, Israel, May 12 -- Scitex Corporation Ltd., a world leader in industrial inkjet digital printing solutions, today announced its financial results for the first quarter ended March 31, 2003. Scitex's revenues for the first quarter of 2003 were $62.6 million, an increase of 3.1% from $60.7 million in the first quarter of 2002. Operating loss was $0.2 million (before amortization of intangibles of $1.7 million), compared to operating income of $2.2 million in the first quarter of 2002 (before amortization of intangibles of $0.8 million). Net loss for the quarter was $6.8 million, compared to a net loss of $1.0 million in the corresponding quarter of 2002. This is the first quarter in which Scitex includes the results of the combined entity of Scitex Vision Ltd. and Aprion Digital Ltd. Accordingly, Scitex's results were impacted by, among others, the combined entity's restructuring costs of $1.2 million and $2.5 million of tax expenses, mainly attributed to a write-off of a deferred tax asset. Scitex's financial results for 2002 did not include figures for Aprion Digital Ltd. on a consolidated basis, as Scitex then held only a minority interest in Aprion. Geographically, Europe contributed 41% of the revenues in the first quarter of 2003, followed by the Americas with 37% of revenues, and the Far East trailed with 21% of revenues. Commenting on the results, Mr. Yeoshua Agassi, President and CEO of Scitex, said: "The continuing slow down of the economy worldwide, especially in the United States and Japan, combined with the uncertainty preceding and during the war in Iraq, have contributed, among other things, to a tense market environment and the lengthening of sales cycles of capital equipment, in the primary markets in which Scitex, through its subsidiaries, operates." Mr. Agassi added: "Nevertheless, Scitex Digital Printing continued to show improvement in several areas. It managed, after a prolonged process, to improve its gross profits and was recently selected by French social security system to supply high-speed business color printing systems. SDP met its earnings targets for the first quarter and improved its cash flow. The main challenges for SDP in the next quarters are to expand its customer base and to deepen its penetration into the Transactional Documents market." "The combined entity of Scitex Vision and Aprion Digital has been focusing on completing the integration of the operations of these two entities. While it was able to maintain the planned level of sales in the graphic arts market, it did not meet the forecasted sales for the packaging market in the quarter. Accordingly, in addition to maintaining its leadership position in the graphic arts market, Scitex Vision is faced with several challenges for the next several quarters, such as completing the integration of the combined entities, increasing sales to the packaging market and improving its cash flow." Concluded Mr. Agassi. Scitex's Subsidiaries Scitex Digital Printing, Inc. (SDP) Revenues of Scitex Digital Printing, our wholly owned subsidiary based in Dayton, Ohio, for the first quarter of 2003 were $39.6 million, almost unchanged from $39.5 million in the first quarter of 2002 and a decrease of 12% from $44.8 million in the fourth quarter of 2002. Operating income was $3.0 million (7.6% of revenues), compared to $2.8 million in the first quarter of 2002 and $1.3 million in the fourth quarter of 2002 (figures are before amortization of intangibles). As previously announced, Caisse Nationale d'Assurance Maladie des Travailleurs Salaries (CNAMTS), the health branch of the French social security system, has recently selected SDP to supply high-speed digital printing systems. This was their second selection of SDP since 1998, and has the potential to generate $30 million in equipment and service revenue over a 5-year period. Also during the first quarter, Siemens Dematic, a manufacturer and distributor of sorting equipment systems, announced its award to SDP for a mailing application using SDP's Dijit 5120 printer for addressing and labelling. Installations that would cover 54 sites throughout 2003 are expected to begin in June. SDP continues its activities in the marketing of the value of color in transactional documents - which it believes will be an important foundation for sales in this segment in the coming quarters. Scitex Vision Ltd. (the combined entity of Scitex Vision Ltd. and Aprion Digital Ltd., which currently holds the name of Aprion Digital Ltd., but it is in the process of adopting the name Scitex Vision Ltd.) On January 1, 2003, Aprion Digital Ltd. acquired from Scitex all of the outstanding share capital of Scitex Vision Ltd. in exchange for shares in Aprion. Following the consummation of the transaction, Scitex holds approximately 75% of the combined entity's outstanding share capital. The financial results for the period ended March 31, 2003 are the first in which the transaction and the financial results of the combined entity are included. The first quarter of 2003 was marked by the integration of Scitex Vision's operations with those of Aprion Digital. During the quarter, most of Scitex Vision's activities were combined and aligned, including distribution and customer support, manufacturing and logistics, research and development and administrative functions. The new entity's headquarters have relocated to a modern 8,000 square meter facility in Netanya, housing all of its Israeli based activities. In light of the acquisition of Scitex Vision by Aprion, of a certain reduction in the line of credit available to Scitex Vision, and Scitex Vision's cash needs, the Board of Directors of Scitex Vision has approved a rights offering of between $6 million and $10 million. Scitex and two other principal shareholders of Scitex Vision have expressed their agreement in principle to participate in the proposed rights offering. Revenues of Scitex Vision for the first quarter of 2003 were $23 million, an increase of 8.9% from $21.2 million in the corresponding quarter of 2002 and an increase of 10% from $20.9 million in the fourth quarter of 2002 (Aprion Digital, which had no revenues in the first quarter of 2002, recognized revenues of $2.1 million in the fourth quarter of 2002). Operating loss was $2.4 million, compared to operating income of $0.2 million in the first quarter of 2002 and operating loss of $0.3 million in the fourth quarter of 2002 (figures are before amortization of intangibles). As noted above, Scitex Vision's 2003 figures comprise the combined entity of Scitex Vision and Aprion Digital. Accordingly, Scitex Vision's results were impacted this quarter by, among other things, the combined entity's restructuring costs of $1.2 million and $2.5 million of tax expenses, mainly due to a write-off of a deferred tax asset (as it is not expected, after the transaction, to utilize it in the foreseeable future). Scitex Vision's 2002 figures did not include Aprion Digital's figures (the operating expenses of Aprion Digital in the first quarter of 2002 were $4.6 million). During the quarter, Scitex Vision renamed its Shaldag SP Industrial Digital Press for corrugated packaging as Scitex Vision Corejet. Twelve of such systems are now installed and operating at key packaging customer sites. Scitex Vision views the Packaging market as a growth opportunity for the future. Recently, Scitex Vision received assessments from the Israeli Tax Authorities ("ITA") relating to certain matters in the years 1995-2000 of approximately NIS 30 million, including interest and index adjustment (currently, represents approximately US$ 6.7 million). Scitex Vision appealed to the District Court in Tel Aviv against the ITA tax assessments, but the outcome of the appeal cannot be predicted at this time. Scitex Vision believes that its applicable reserves as at the end of the first quarter are sufficient. Major Investment Creo Inc. For its second quarter of 2003 (ended March 31, 2003), Creo reported revenues of $141.5 million compared to revenues of $130 million in the second quarter of 2002 and $142.8 in the previous quarter. Creo's net loss under US GAAP for the quarter was $1.2 million. With effect from December 1, 2002, Scitex accounts for the Creo investment as "available for sale" and the changes in its share price value are recorded to shareholders' equity. Gain or loss from this investment will only be recognized in the event of a sale of its Creo shares or in the event of impairment that is not of a temporary nature. Accordingly, the change for the quarter in Scitex's investment in Creo was a decrease of $15.6 million recorded to shareholders' equity due to the decrease in the market price of Creo's shares at quarter-end to $5.68 per share, compared with $8.17 at the end of the previous quarter (the last reported closing market price of Creo's share on NASDAQ was $6.20). Scitex holds 12.7% in Creo's outstanding share capital. Explanatory Note to Financial Statements This quarter is the first one in which Scitex consolidates in its financial statements a majority-owned company - the combined Aprion Digital/Scitex Vision entity, in which it holds approximately 75% (compared to incorporating Scitex Vision's results as a wholly-owned subsidiary). As a result, all assets and liabilities of the combined entity are included in Scitex's balance sheet, with a deduction of the relative minority interest in the combined entity's equity. Similarly, Scitex fully consolidates the combined entity's Statement of Income, with a deduction of the relative minority interest in the combined entity's Statement of Income.