Scitex Announces Q4 Results: Net loss of $28.0 million, SDP Sales up 15%
Press release from the issuing company
TEL AVIV, Israel, Feb. 18 -- Scitex Corporation, a world leader in industrial digital inkjet printing solutions, today announced financial results for the fourth quarter and full year ended December 31, 2002.
Revenues for the fourth quarter of 2002 were $65.6 million, an increase of 11% from $59.1 million in the fourth quarter of 2001. Operating income, before amortization of intangibles (of $0.9 million) was $0.4 million. Net loss was $28.0 million, primarily associated with a $22.3 million write-down of Scitex's carrying value of its holding in Creo Inc. to align with the decrease in Creo's market valuation (see below for further details on Creo's write-down).
Revenues for the fiscal year 2002 were $242.8 million, a decrease of 5% from $256.2 million in 2001. Operating income for 2002 was $5.4 million before amortization of intangibles (of $3.3 million). Net loss was $32.0 million, of which $22.3 million associated with the write-down of Scitex's holding in Creo and $4.1 million associated with equity losses on investments in Objet Geometries Ltd. and Jemtex Ink Jet Ltd.
Geographically, the Americas contributed 40% of the yearly revenues, followed by Europe with 37% of revenues, and the Far East (including Japan) and rest of the world with 23% of revenues.
Mr. Yeoshua Agassi, President and CEO of Scitex, commented: "2002 was the second full year in which Scitex has been focusing on its industrial ink jet digital printing business activities. During the year, we demonstrated this focus by continuous investments by our primary operating subsidiaries, Scitex Digital Printing and Scitex Vision, in new products and markets; by combining the operations of Scitex Vision and Aprion Digital; and by further investment in Jemtex. We have now completed the main phase of our strategic evolutional structure change into a company specialized in industrial inkjet digital printing solutions through our subsidiaries and strategic investments."
Mr. Agassi continued: "Despite the challenging market environment, especially the capital equipment market, Scitex managed to obtain only a slightly lower annual revenues level compared to 2001 and a positive operating income, compared to several other companies in the industrial printing arena that have suffered a more significant decrease in their annual revenues. Scitex Digital Printing revenues for 2002 decreased on an annual basis compared to 2001, but the company achieved a considerable growth during the fourth quarter of 2002, increasing its revenue by an additional $10 million compared to the previous quarter. All in all, Scitex Digital Printing's revenues for the second half of 2002 were slightly higher than those for the first half of the year. Scitex Vision's revenues for 2002 decreased on an annual basis compared to 2001, as well as on a quarterly basis compared to the third quarter of 2002, but were similar to those of the second quarter of 2002 and higher than the fourth quarter of 2001."
Mr. Agassi concluded: "As for 2003, while global economic conditions remain uncertain and markets are expected to stay tough, we will exert our primary efforts to increase our revenues, as well as to improve our gross margin and profitability. In sum, I believe that Scitex enters 2003 as a more efficient company, focused on its core business in the digital printing arena, and well positioned for the time when global economic and industry conditions recover".
Scitex Digital Printing, Inc. (SDP)
Revenues for the fourth quarter of 2002 were $44.7 million, an increase of 15% from $39 million in the fourth quarter of 2001. Operating income, before amortization of intangibles, for the fourth quarter of 2002, was $1.3 million compared to $2.5 million (excluding also restructuring costs) for the fourth quarter of 2001.
Revenues for 2002 were $157.1 million compared to $164.6 million for 2001, reflecting a 5% decrease. Operating income, before amortization of intangibles, for 2002, was $6.1 million compared to $11.2 million (excluding also restructuring costs) for 2001.
In the fourth quarter, SDP experienced a significant increase in demand in the commercial printing marketplace in North America after over two years of weakness in capital investments in this sector. In the Far East, SDP experienced a slow year in Japan, but made great strides in the Chinese marketplace. The Chinese market will continue to be a focus for SDP in 2003.
SDP also placed a full-color Scitex VersaMark Business Color Press system in Data One, a French customer that already uses a Scitex VersaMark solution to print black output. SDP expects this installation to be a valuable point of reference for other European customers who are looking to provide high- volume dynamic color output. The release of the solvent-based Liberty and drop-on-demand-based Passport products resulted in promising initial placements in America and Europe in the fourth quarter of 2002.
Recently, SDP announced a change in leadership for its European operations with the appointment of Karl Cerny as Vice President and Managing Director. Mr. Cerny is a long-time veteran in the printing industry, having served 19 years in Xerox, including an assignment as vice president of the Xerox Production Systems Group, Europe.
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 held approximately 75% of Aprion's outstanding share capital. As the transaction with Aprion closed after year-end, the financial results for the period ended December 31, 2002 do not reflect this transaction
Revenues for the fourth quarter of 2002 were $20.9 million, an increase of 4% from $20.1 million in the fourth quarter of 2001. Operating loss, before amortization of intangibles, for the fourth quarter of 2002, was $0.3 million compared to operating loss of $1.8 million (excluding also restructuring costs) for the fourth quarter of 2001.
Revenues for 2002 were $85.7 million compared to $91.6 million for 2001, reflecting a 6% decrease. Operating income, before amortization of intangibles, for 2002, was $2.3 million compared to $6.7 million (excluding also restructuring costs) for 2001.
The fourth quarter of 2002 was marked by the preparations of Scitex Vision for the planned transaction with Aprion Digital Ltd. The detailed planning contributed substantially to a smooth transition into a combined company. The combined company, which retained the Scitex Vision name, is now operating as one integrated unit in the graphic arts and packaging market, as well as in the textile market through its partnership programs.
The fourth quarter of 2002 also marks the end of a challenging year for Scitex Vision, having to cope with adverse global economic conditions. Nevertheless, Scitex Vision generally maintained its gross margins on an annual base on a slightly less than yearly average level of revenues.
Following the end of the year, Scitex Vision's VEEjet, a digital printer utilizing UV ink and a manual sheet-fed system for printing on rigid and flexible media, began its beta testing programs at customer sites.
Recently, Scitex Vision appointed Steve Zunde as President of Scitex Vision America. Mr. Zunde brings with him a wide global management experience in the graphic arts industry, including serving as President of the Digital Division of KBA North America. Prior thereto, Mr. Zunde was President of Anchor Chemicals, the printing chemicals division of International Paper Co.
Industrial Ink Jet Companies
Jemtex Ink Jet Printing Ltd.
Jemtex develops industrial digital printing systems, based on its novel Continuous Ink Jet technology. During 2002, Jemtex focused on the development of a printing bar for the heavy-duty digital textile printing market -- the JemBar, as well as on the continuation of the project to develop a digital system for the decorative ceramic tile printing market, together with strategic partners. Jemtex began to recognize revenues in 2002.
In the fourth quarter of 2002, Scitex signed an agreement to invest $2.4 million in Jemtex, coupled with options for Scitex to invest an additional $1.6 million. Following the $2.4 million investment, Scitex currently owns 49.8% of Jemtex.
Objet Geometries Ltd.
Objet develops and manufactures rapid prototyping ink jet printers for the creation of three-dimensional models. During 2002, Objet installed tens of systems throughout the world, mainly in the Far East, and Objet recognized revenues for the first time in the fourth quarter. Scitex currently owns 17.4% of Objet.
For Creo's first fiscal quarter of 2003 (ended December 31, 2002), Creo reported revenues of $142.8 million compared to revenues of $139.5 million in the first fiscal quarter of 2002 and $138.4 million in previous quarter. Creo's adjusted earnings for the first quarter were $2.4 million or $0.05 per share (diluted). The adjusted earnings exclude the effect of intangibles amortization, restructuring and business integration costs, the royalty arrangement with the Office of the Israeli chief Scientist, equity loss on investments, and their tax effects.
With effect from December 1, 2001, Scitex has accounted for the Creo investment as "available for sale" for which changes in its share price value are recorded to shareholders' equity. Gain or loss from this investment is recognized in the event of a sale or in the event of impairment in value, which has other-than temporary in nature. Due to the decrease in the market price of Creo's shares for some time, Scitex was required in the fourth quarter of 2002 to recognize a loss that amounted to $22.3 million. Creo's share price in Scitex's books after recording the loss is $8.17 per share (Creo's share price on NASDAQ at December 31, 2002). Following the release of Creo's financial results for the first fiscal quarter of 2003, Creo's share price fell significantly and as at February 14, 2003, Creo's share price on NASDAQ is $6.58. Scitex holds 12.7% in Creo's outstanding share capital.
Balance Sheet and Cash Flow
Scitex's cash and cash equivalents as at the end of 2002, on a consolidated basis, remained the same compared to the third quarter of 2002. During the fourth quarter, receivables increased, mainly due to increased revenue level, extended payments terms, and VAT returns. Inventory was slightly increased.
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