Scitex Corporation (NASDAQ: SCIX) today reported its results
for the quarter ended June 30, 2000.
The transaction with Creo Products Inc., whereby Scitex merged its
preprint business with Creo, closed on April 4, 2000 and generated a
pre-tax gain of $191 million. The full impact of the transaction
(including the resulting capital gain and transaction expenses) is
included in the results for the second quarter of 2000. Details of the
financial treatment of the CreoScitex transaction are provided later
in this earnings release.
Quarter Highlights
The second quarter of 2000 was an extremely busy period for
Scitex. In addition to the transaction with Creo, Scitex announced its
new strategy, centered on building a network of leading and innovative
companies that are focused on combining digital imaging technologies
with the power of the Internet. The second quarter marked substantial
progress in Scitex's digital printing activities in new product
introductions and business performance. At the DRUPA 2000 trade show
in May, Scitex was a major participant and through its network of
companies exhibited many innovative technologies and new products. In
this context, Scitex made new investments in Objet Geometries Ltd., a
leading developer of color three-dimensional inkjet printing
applications, and InfoBit Ltd., a start-up company which develops
innovative and unique visual navigation tools for the World Wide Web
and corporate Intranet environments.
Consolidated Results
In the second quarter, Scitex recorded revenue of $53.4 million
and operating income of $2.7 million before amortization of goodwill
($2.3 million) and reorganization-related costs ($3.3 million,
included in operating expenses). Net income in the second quarter,
including the gain resulting from the Creo transaction, totaled $115.0
million or $2.66 per share on a diluted basis.
Since Scitex's involvement in the preprint business has changed
from full ownership through Q1 2000 to an equity investment in Creo
Products Inc. beginning Q2 2000, direct comparison of the company's
results for the second quarter of 2000 with those for the second
quarter of 1999 is not meaningful.
Yoav Z. Chelouche, President and Chief Executive Officer of
Scitex, said, ``We are pleased with our second quarter achievements. We
are on target with our business plan and are continuing to maximize
the synergetic opportunities created within our network of companies,
in order to generate value and growth from the convergence of digital
imaging technologies with the Internet.''
DRUPA 2000
DRUPA 2000, held in Dusseldorf, is the premier show for the
conventional printing and graphic arts industry and takes place every
four years. Over 400,000 visitors attended this year's show in May,
with 2,000 exhibitors from 50 countries around the world. DRUPA 2000
was perceived as 'digital DRUPA'.
Recognizing that digital printing technologies complement
conventional printing, commercial printers are buying into the
technology of digital printing, bringing it into mainstream. Inkjet
based technologies were at the center of attention, with industrial
printing being the area of greatest innovation at the show. Scitex
Digital Printing, with its inkjet-based Scitex VersaMark Business
Color Press, and Aprion Digital, with its MAGIC inkjet
technology broadening the market applications of inkjet technologies,
drew great interest.
Scitex Network Companies
Creo Products Inc., in which Scitex has an equity interest of
approximately 28% posted record revenues of $162.6 million in its
third quarter 2000. The company had a strong DRUPA showing and used
this event to launch CreoScitex, its principal operating division.
Effective May 18, the joint venture between Heidelberg and Creo was
terminated, and the companies entered into an original equipment
manufacture (OEM) relationship on those products that were formerly in
the joint venture.
Scitex Digital Printing (SDP) - At DRUPA 2000, Scitex unveiled the
Scitex VersaMark Business Color Press (BCP), the world's highest speed
100% variable data digital color press. With extremely low operating
costs per page, the BCP is set to redefine transactional printing,
offering effective one-to-one marketing on financial statements,
coupons and catalog pages. As SDP transitions into these new markets
and launches its new products, the company recorded $35.5 million of
revenue in the second quarter of 2000, a small reduction compared to
$36.9 million for the same period last year. Operating income for the
second quarter, before amortization of goodwill, was $1.7 million.
Scitex Wide Format Printing continued to experience fast growth,
with record revenues for the second quarter of 2000 of $17.8 million,
a rise of 91% compared to the second quarter last year. Operating
income excluding amortization of goodwill was $2.6 million. During the
quarter, Scitex Wide Format established its independent distribution
activities in Europe and North America, building management teams and
setting up business and logistics infrastructure. Sales of the Scitex
Pressjet digital press, on which Scitex cooperates with 3M, began
in this quarter.
Aprion Digital, appearing for the first time at a major trade
show, had an excellent DRUPA demonstrating its MAGIC inkjet technology
running on prototype printing systems. Reaching its DRUPA milestone,
the company received $8 million, representing the second installment
of its financing package. Initial beta placements are planned towards
the end of 2000. Aprion signed a strategic distribution agreement with
Scitex Wide Format Printing, an additional value added distribution
partner, to bring to market its MAGIC technology.
Karat Digital Press initiated commercial shipments of the 74
Karat digital offset press and recorded first time revenue in the
quarter on sales of five units. Following a strong DRUPA, Karat
received ten orders. The company handles distribution in Europe
through KBA and has established its own distribution and support
operation in North America.
Vio Worldwide Limited, an applications service provider (ASP) for
the graphic arts industry, is Scitex's 50/50 joint venture with
British Telecommunications plc. The latest quarter saw Vio expand
activities in North America and add several software applications to
its online suite of applications. As the company transitions from a
network provider to an ASP, 20% of the latest quarter's revenue was
generated from applications.
CreoScitex Transaction
In April, Scitex closed the sale of the assets of its digital
preprint business to Creo Products Inc. in consideration for 13.25
million shares of Creo. The impact of this transaction on the second
quarter results is as follows:
- A pre-tax gain of $191 million from the sale of the preprint
business is included in 'Other income';
- A loss of $35 million, of which $24 million is a one-time
write-off of Creo in-process R&D, is included in 'Share in
losses of equity investments'; and
- At June 30, 2000, the book value of the equity investment in
Creo is $386 million.
Chelouche continued, ``In early April, Scitex announced its
new corporate strategy to dedicate itself to building a network of
leading and innovative companies that are focused on combining digital
imaging technologies with the power of the Internet. This strategy is
based on the following business objectives:
- Enhance and highlight the value of its existing activities and
investment portfolio;
- Invest in specialized technology companies that are
revolutionizing their industries;
- Leverage the complementary strengths of the existing network
of companies that Scitex Corporation either owns or has an
interest in; and
- Add managerial depth and market knowledge to this network of
companies.
``Our close adherence to this strategy is already beginning to bear
fruit, and this has been reflected in the good progress achieved
during the second quarter. We've expanded our network of companies,
and strengthened our management team with the addition of Yossy
Zylberberg as Chief Financial Officer. Our business model involves
enhancing the value of companies within Scitex's portfolio. As each of
our network companies grows its operations, we expect to approach
capital markets for either private equity investment or public equity
offerings.''
Published by Israel's Business Arena on August, 2000.