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Scitex Reports 2001 Results, Revenues Rise 13% to $256.2 Million

Press release from the issuing company

TEL AVIV, Israel, March 7 -- Scitex Corporation Ltd., a world leader in industrial inkjet digital printing solutions, today announced results for the fourth quarter and year ended December 31, 2001. Scitex recorded significant annual revenue growth in its industrial ink jet businesses during 2001, although the fourth quarter and annual results were significantly affected by the worldwide economic slowdown. Revenues for the fourth quarter were $59.1 million, a decrease of 9% from $64.5 million in the fourth quarter of 2000. Operating loss before amortization of intangibles (of $18.1 million) and restructuring costs (of $1.7 million) was $0.5 million. Net loss was $35.8 million. Revenues for 2001 were $256.2 million, representing over 13% growth compared to the combined revenues of Scitex Digital Printing and Scitex Vision in 2000. Operating income for 2001 was $11.9 million (before restructuring costs and amortization of intangibles). Net loss was $250.3 million, of which $219 million associated with Scitex's holding in Creo and $27 million associated with amortization of intangibles. Beginning in the second quarter of 2000, Scitex's involvement in the digital preprint business changed from full ownership to an equity investment in Creo Products Inc. Accordingly, a year over year comparison of 2001 to 2000 is not meaningful. Mr. Yeoshua Agassi, President and CEO of Scitex commented: "Year 2001 is the first full year in which Scitex was mainly focused on its industrial ink jet digital printing business activities, which grew 13% compared to 2000 and yielded operating income of $17.9 million in 2001 (the combined operating income of Scitex Digital Printing and Scitex Vision before restructuring costs and amortization of intangibles). Mr. Agassi continued: "During the year, we primarily demonstrated this focus by continuous investments by Scitex Digital Printing and Scitex Vision in new products and markets and by the increase in our share in Aprion Digital to a total of 43%. In addition, during the final quarter of the year, we sold a major portion of the shares held in Creo Products, bringing our holding in that company from 27% down to approximately 13%, and significantly improving our cash position. As for the financial results and the economic slowdown, especially in the second half of the year, both Scitex Digital Printing and Scitex Vision took measures to reduce their expenses by reducing their workforce and cutting various expenses.'' Mr. Agassi concluded: "The considerable revenue growth of our subsidiaries during the first three quarters of 2001 was affected in the last quarter by adverse market conditions. As for 2002, while global economic conditions remain uncertain, we would like to see moderate revenue growth, as well as some improvements in gross margin and profitability.'' During 2001, Scitex underwent organizational changes, with the resignation of Yoav Chelouche as President and Chief Executive Officer and the appointment of Yeoshua Agassi to that post. As part of Scitex's overall strategy of strengthening its operating units, Yossy Zylberberg, formerly Corporate Vice President and Chief Financial Officer, has taken up the position of Chief Operating Officer at Scitex Digital Printing in Dayton, Ohio, Scitex's largest subsidiary. Yahel Shachar, who joined the Company during the fourth quarter, was appointed Chief Financial Officer and Corporate Secretary. During the fourth quarter of 2001, Scitex conducted extensive negotiations with the Internal Revenue Service with regard to the conclusion of audits of US subsidiaries for the years 1992-1996 and made an advance payment of $20 million. Scitex is expecting the final IRS position to be received in the coming few months. Scitex's Subsidiaries Scitex Digital Printing, Inc. (SDP) Notwithstanding the weakness in the fourth quarter due to global events, SDP experienced continued revenue growth for the year 2001. Revenues for the fourth quarter 2001 were $39 million, a decrease of 10% from $43 million in the fourth quarter of 2000. The decreased revenues negatively affected operating income, which totalled $2.5 million as compared to $4.6 million in the fourth quarter of 2000 (figures are before restructuring costs and amortization of intangibles). Annual revenues for 2001 were $165 million, reflecting an 8.1% increase from $152 million in 2000. SDP marked a consistent growth of its recurring revenue business as a result of recent changes to the company's service and ink strategies and "click-based'' transactions coming into effect. SDP's business in 2001 continued to be geographically balanced with US, Europe and Asia Pacific (including Japan) each contributing over 30%. The 9" format VersaMark product line continues to gain momentum and constituted over 47% of 2001 equipment sales as compared to 41% for 2000. Scitex Vision Ltd. Scitex Vision revenues for the fourth quarter of 2001 were $20.1 million, a decrease of 6.4% from $21.5 million in 2000, marking a weak ending to an otherwise strong year for the company. In the fourth quarter, Scitex Vision recorded a technology write-down ($15 million, following an economic analysis of the value of intangibles acquired in 1998) and restructuring costs ($0.5 million of reduction in workforce). The operating loss for the fourth quarter before these non-recurring expenses and amortization of intangibles was $1.8 million compared to a $2.4 million operating income in the fourth quarter of 2000. The year 2001 was one of continued strong growth for Scitex Vision. Annual revenues totalled $91.6 million, compared with $75.5 million in 2000, an increase of 21%. Operating income (before restructuring costs and goodwill amortization) amounted to $6.7 million. During 2001, Scitex Vision increased its product line with the launch of the Scitex EnJet and XLJet, as well as introduction of the VeeJet. All products are unique in their categories. Industrial Ink Jet Companies Aprion Digital Ltd. Aprion develops Drop-On-Demand ink jet technologies and systems for a variety of end user digital printing applications. During the year, Aprion signed agreements with two strategic partners to develop future systems for the printing industry. As part of these agreements, the partners invested $11.5 million in Aprion. The company is progressing to conclusion of its beta testing program and expects to start recording revenue in the coming months. During the fourth quarter, Scitex converted a note it held in Aprion into Aprion's shares, and increased its ownership in Aprion to 43%. Jemtex Ink Jet Printing Ltd. Jemtex develops heavy-duty digital printing systems, based on its novel Continuous Ink Jet technology. During 2001, Jemtex moved from the technology development stage to initial commercialization through two programs with strategic partners. Scitex holds 36.6% in Jemtex. Objet Geometries Ltd. Objet develops and manufactures ink jet printers for the creation of three-dimensional models. In 2001, the company moved from the R&D phase to commercial activity with several units installed at leading customer sites. During the year, Objet established a platform of marketing, sales and customer support in Europe and the USA. The company will start recording revenues in the next few months. During 2001, Scitex invested an additional $1.7 million in Objet (of which $0.7 million was invested in the fourth quarter) and now holds 18.7%. Other Investments Creo Products Inc. (Reported with a three month lag) For the fourth fiscal quarter of 2001 (ended September 30, 2001), Creo reported revenues of $143 million compared to revenues of $173.3 million in the fourth fiscal quarter of 2000. Creo's adjusted loss for the quarter was $5.7 million or $0.12 per share (diluted). The adjusted loss did not include one-time charges related to intangible assets, investments, future tax assets, account receivables, obsolete inventory and other assets. It also did not include restructuring charges related to reduction in work force. Creo's net loss for the fourth fiscal quarter under US GAAP was $351.4 million. Scitex's share in Creo's one-time charges was included in Scitex's third quarter financial statements. Therefore, in the fourth quarter results, Scitex included only its share in Creo's ongoing losses. During the quarter, Scitex sold seven million Creo shares and reduced its holding in Creo to 12.7%. The loss recorded from the sale totalled $6 million. Under US GAAP, beginning December 1, 2001, Scitex accounts for the Creo investment as "available for sale'' and the changes in its value are accrued into capital surplus. Profit or loss from this investment will be recognized in the event of an additional sale of shares or permanent impairment. Scidel Technologies Ltd. Scidel develops a technology for electronic insertion of virtual advertisements into live and taped televised sporting events. On February 28, 2002 (subsequent to the date of the 2001 financial statements), Princeton Video Image, Inc. a leader in virtual advertising and imaging solutions, signed a definitive agreement to acquire the assets of SciDel. Scitex holds 29.4% in Scidel.