Scitex Announces 1Q Results: Digital Printing Unit Sales $39.5 million
Wednesday, May 15, 2002
Stable Performance, $2.2M of Operating Income (before amortization) And Revenues of $60M TEL AVIV, Israel, May 14 -- Scitex Corporation Ltd., a world leader in industrial inkjet digital printing solutions, today announced results for the first quarter 2002 ended March 31, 2002. Scitex's revenues for the first quarter 2002 were $60.7 million, a decrease of 5% from $64.1 million in the first quarter of 2001. Operating income before amortization of intangibles (of $0.8 million) was $2.2 million. Net loss for the quarter was $1 million. Scitex's business in the first quarter of 2002 remains geographically balanced with the US and Europe contributing 39% and 38% of revenues respectively, and Asia Pacific (including Japan), with a relatively weak performance, totalling 23% of revenues. Mr. Yeoshua Agassi, President and CEO of Scitex commented: "The first quarter of 2002 continued to be difficult for capital equipment manufacturers. Nevertheless, Scitex managed to achieve a 3% increase in revenues from the previous quarter and more than $2 million of operating income. Those achievements were reached in part due to the cost reduction measures put into effect towards the end of 2001 and during the first quarter this year at Scitex Digital Printing, Scitex Vision and at the corporate level." Mr. Agassi continued: "As for the remainder of 2002, visibility is still limited, primarily due to uncertain global economic conditions, yet we would like to achieve reasonable revenue growth, as well as some improvements in profitability." Scitex's Subsidiaries Scitex Digital Printing, Inc. (SDP) Revenues for the first quarter of 2002 were $39.5 million, a decrease of 4% from $41.3 million in the first quarter of 2001. Operating income was $2.8 million (7% of revenues) as compared to $4.4 million in the first quarter of 2001 (figures are before amortization of intangibles). The first quarter included a sale of two VersaMark Business Color Press units to DST International Output (DSTi Output) through SDP's reseller agreement with Xerox Corporation. DSTi Output is a subsidiary of DST International, a world leading supplier of multi-currency asset management systems and work management solutions and will utilize the VersaMark Business Color technology to realize improved production throughput as well as introducing color on transactional statements. Scitex Digital Printing also introduced VersaMark Vantage, its newest digital color printing system. Vantage, a fully integrated and upgradeable system using Scitex's innovative color printing technology, responds to the industry's need for affordable digital color printing with an entry level system price of under $1 million. Scitex Vision Ltd. Revenues for the first quarter of 2002 were $21.1 million, a decrease of 7% from $22.8 million in the first quarter of 2001. Operating income was $0.2 million (1% of revenues) as compared to $2.5 million in the first quarter of 2001 (figures are before amortization of intangibles). During the first quarter of 2002, the company introduced at the ISA show the new Pressjet II, an advanced drum digital printer with a 6-color inkjet system. In addition, Scitex Vision conducted its first Superjet (high-end roll-to-roll digital printer produced by Aprion) open house which took place in Europe, and installed the first Superjet in the US. After the end of the first quarter, Scitex Vision acquired advanced digital printing technologies from Siantec SARL, a French company. Based on the acquired technology, Scitex Vision intends shortly to introduce the Veejet, a digital printer utilizing UV ink and a manual sheet-fed system, for printing on rigid and flexible media. Industrial Ink Jet Companies Aprion Digital Ltd. Aprion develops Drop-On-Demand inkjet technologies and systems for a variety of end user digital printing applications. Recently, Aprion announced the signing of investment agreements with IBM and Hitachi Koki, as part of a strategic partnership to develop novel digital systems for the printing industry. Aprion has installed to date 11 systems, part as beta installations and the rest as commercial sales. The company is progressing satisfactorily towards the conclusion of its beta testing program and expects to start recording revenue in the coming months. Scitex holds 43% in Aprion's outstanding share capital. Jemtex Ink Jet Printing Ltd. Jemtex develops heavy-duty digital printing systems, based on its novel continuous inkjet technology. During the first quarter, Jemtex made considerable progress with their digital ceramic tile printing project and the first prototype has been installed at the customer site for testing. Scitex holds 36.6% in Jemtex's outstanding share capital. Objet Geometries Ltd. Objet develops and manufactures inkjet printers for the creation of three- dimensional models. Objet has moved from the R&D phase to commercial activity with several units installed at leading customer sites. During the first quarter of 2002, Scitex invested an additional amount of $1.3 million in Objet and now holds 17.4% of Objet's outstanding share capital. In the first quarter of 2002, as required by GAAP, Scitex retroactively changed its method of accounting for the investment in Objet from the cost method to the equity method, since Scitex now exercises significant influence over Objet. Consequently, the investment in Objet in Scitex's books as of December 31, 2001 was restated and Scitex's equity share of the results of Objet was included in the first quarter results. Other Holdings Creo Products Inc. For its second quarter of 2002 (ended March 31, 2002), Creo reported revenues of $130.1 million compared to revenues of $172.9 million in the second quarter of 2001. Creo's net loss under US GAAP for the quarter was $18.2 million or $0.37 per share (diluted). Beginning December 1, 2001, Scitex accounts for the Creo investment as "available for sale" and the changes in its 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, which is not of a temporary nature. Accordingly, the change for the first quarter of 2002 in Scitex's investment in Creo was a decrease of $15.8 million recorded to shareholders' equity (Creo's stock price at quarter-end was $10.38). Scitex holds 12.7% in Creo's outstanding share capital. Balance Sheet and Related Matters Following the quarter end, Scitex closed the final agreement dissolving the Karat joint venture between Koenig & Bauer AG (KBA) and Scitex. This agreement settled the financial matters between the parties and transferred all responsibility for the Karat business to KBA. During the first quarter, Scitex paid Karat's bank loans in Israel and during the second quarter, Scitex recovered most of that payment from KBA (the increase of Other Receivables in the first quarter balance sheet resulted from the KBA's commitment under the agreement). As previously reported, Scitex has been in negotiations with the US Internal Revenue Service with regard to the conclusion of an audit of its U.S. subsidiaries for the years 1992 through 1996. These negotiations continued during the first quarter of 2002. In partial settlement of this audit, Scitex expects to consent to a "partial assessment" by the IRS for $10.6 million of federal taxes on the issues agreed upon to date. This amount excludes interest and state taxes which in due course will be assessed and are expected to approximately double the above figure. In addition, there are certain significant proposed IRS adjustments to income for these years that Scitex disputes, and intends to appeal. While Scitex intends to vigorously defend its position on these issues, the outcome of the appeal cannot be predicted at this time. Scitex has already made advance payments of $21.5 million on account of this audit. Due to the advance payments and reserves established by Scitex, no material impact on its financial statements is expected from the eventual outcome of this matter.