Scitex Announces Second Quarter 1999 Results

Operating Income up 62% on Revenues Growth of 5%

Herzlia, Israel, July 28, 1999
Scitex Corporation Ltd. (Nasdaq: SCIXF) reported net income for the second quarter of 1999 of $5.0 million or $0.12 per share (diluted) compared to $3.1 million or $0.07 per share for the second quarter of 1998. Second quarter 1998 results include a $4 million loss from the discontinued operations of the digital video business.

Operating income for the second quarter of 1999 was $12.6 million, up 62% over the $7.8 million recorded in the second quarter of 1998. The increase in operating income derives primarily from the combination of revenue growth and a reduction in operating expenses.

The results for the second quarter of 1999 include losses from equity investments totaling $6.1 million, compared to $2.1 million in the same period last year. Excluding equity losses and discontinued operations, income for the second quarter was $11.1 million or $0.26 per share (diluted), compared to $9.2 million or $0.21 per share (diluted) last year.

Gross profit for the second quarter of 1999 was $73 million (43% of sales), compared with $70 million (43% of sales) in the same period last year.

Revenues for the second quarter of 1999 were $170 million, up 5% from the $162 million recorded in the second quarter of 1998.

In the second quarter of 1999, revenues from the Americas were $80 million compared to $75 million for the second quarter of 1998. Revenues from Europe grew to $62 million compared to $55 million for the second quarter last year. Japan recorded revenues of $12 million for the quarter compared to $20 million for the second quarter last year, while Asia Pacific and other regions recorded $15 million in revenues compared to $12 million for the second quarter of 1998.

Digital Preprint revenues for the second quarter of 1999 were $116 million compared with $105 million in the second quarter of 1998. The output division performed particularly well, led by strong sales of the computer-to-plate Lotem 800V™ platesetter, as well as workflow (Brisque™) and data management products. Over 200 computer-to-plate Lotem 800V platesetters have been shipped since commercial introduction a year ago.

Revenues from Digital Printing in the second quarter of 1999 were $54 million, down from $57 million for the same period last year. The recently introduced modular Scitex VersaMark™ digital printer line, has been well received in the market but remains below plan due to a longer than expected sales cycle.

For the first half of 1999, the Company recorded net income of $12.6 million or $0.29 per share (diluted), including the reduction of $5 million in reserves associated with the Company's sale of the digital video business. The loss from the first half of 1998 was $38.5 million or ($0.90) per share. First half 1998 results included a $44.3 million charge for acquired in-process R&D, as well as a loss of $7.7 million from the discontinued operations of the digital video business. Revenues for the first half of 1999 were $328 million, up 5% compared to $313 million for the first half of 1998.

At the end of the quarter, the Company agreed in principle to form a new company based upon its Advanced Printing Products Division. The new company will focus on the development of unique industrial digital printing solutions for a wide variety of applications. The new company expects to raise up to $33.5 million.

Commenting on the results, Yoav Z. Chelouche, President and Chief Executive Officer of Scitex said, "Scitex's performance continues to improve. Operating income for the first half of 1999 was higher than for all of 1998.

"We are pleased with the results of Digital Preprint which had a solid quarter led by the output division and by continuing improvement at the Iris Graphics proofers business. Digital Printing was below plan primarily due to the slower than expected ramp up of our new Scitex VersaMark system. Scitex VersaMark is an innovative printing technology with a broad array of features. It opens up many new areas to the Company, but, as a result, is also characterized by a longer sales cycle. Overall, we remain pleased with the market's reception and believe that the system will fulfill our expectations.

"Finally, incorporating the Advanced Printing Products Division will allow it to focus and seek outside funding to continue the development of its unique technology. Our approach to leveraging technological assets by joining with financial or strategic partners as we did with the 74 Karat and Vio, is designed to speed time to market and enhance shareholder value."

Except for the historical information herein, the matters discussed in the news release include forward-looking statements that may involve a number of risks and uncertainties. Actual results may vary significantly based on a number of factors, including, but not limited to, risks in product and technology development, market acceptance of new products and continuing product demand, the impact of competitive products and pricing, changing economic conditions both here and abroad, timely development and release of new products by strategic suppliers and other risk factors detailed in the Company's most recent annual report and other filings with the Securities and Exchange Commission, as well as the effect of the Company's accounting policies.

Scitex Corporation Ltd., a world leader in digital imaging solutions for graphics communications, designs, develops, manufactures, markets and supports products, systems and devices primarily for the digital preprint and digital printing markets. Digital preprint includes image capture, output, proofing, and telecommunication solutions. Digital printing includes Scitex Digital Printing’s very high-speed inkjet printers for variable long-run printing, wide format inkjet printers, Karat’s digital offset presses, and the Company's print-on-demand digital front ends. A worldwide network of direct sales and service offices, dealers, resellers and OEM partners provide global sales and customer support. Scitex shares trade on NASDAQ under the symbol SCIXF. For more information visit the Company’s Internet site: www.scitex.com

SCITEX CORPORATION LTD. (AN ISRAELI CORPORATION) AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(U.S. Dollars in thousands, except per share data)

 

Quarter ended June 30,

Six months ended June 30,

  

1999

1998*

1999

1998*

  

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Revenues            
Sales

$ 116,258

$ 113,207

$ 222,762

$ 215,251

Service

37,490

33,665

72,969

67,278

Supplies

16,422

15,236

31,848

30,271

Total revenues

170,170

162,108

327,579

312,800

          
Cost of revenues        
Cost of sales

57,771

57,045

110,592

113,063

Cost of service

30,483

26,830

60,478

51,517

Cost of supplies

8,840

8,037

16,786

16,145

Total cost of revenues

97,094

91,912

187,856

180,725

              
Gross profit

73,076

70,196

139,723

132,075

             
Expenses           
Research and development expenses

17,657

19,749

35,847

** 83,709

Less participations

(1,947)

(2,542)

(4,173)

(5,786)

Net

15,710

17,207

31,674

77,923

           
Sales and marketing

23,783

24,796

46,993

47,479

General & administrative

18,684

18,127

35,879

34,802

Amortization of goodwill and other intangibles

2,273

2,288

4,569

4,532

Operating income (loss)

12,626

7,778

20,608

(32,661)

               
Financial income - net

620

1,503

1,120

3,353

Other income (expenses) - net

(102)

(80)

93

1,585

              
Income (loss) before taxes on income

13,144

9,201

21,821

(27,723)

Taxes on income

2,028

  

3,330

  
  

11,116

9,201

18,491

(27,723)

Share in losses of equity investments

(6,122)

(2,114)

(10,885)

(3,153)

Income (loss) from continuing operations

4,994

7,087

7,606

(30,876)

              
Discontinued operations:           
Loss from operations   

(4,010)

   

(7,668)

Disposal    

5,001

  
Income (loss) from discontinued operations  

(4,010)

5,001

(7,668)

Net income (loss)

$ 4,994

$ 3,077

$ 12,607

($ 38,544)

              
Earnings (loss) per share - basic and diluted:         
Continuing operations

$ 0.12

$ 0.16

$ 0.17

($ 0.72)

Discontinued operations

$ 0.00

($ 0.09)

$ 0.12

($ 0.18)

  

$ 0.12

$ 0.07

$ 0.29

($ 0.90)

Weighted average number of sharesoutstanding (in thousands) - basic42,6342,87942,82642,844
- diluted

42,731

43,752

43,009

42,844

* Reclassified         
** Includes 44,264 acquired in-process R&D         

SCITEX CORPORATION LTD. (AN ISRAELI CORPORATION) AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. Dollars in thousands)

 

June 30, 1999

Dec. 31, 1998

 

(Unaudited)

(Audited)

Assets   
     
Current assets:   

Cash and cash equivalents

$ 49,454

$ 49,920

Short-term investments

32,862

33,447

Total cash and short-term investments

82,316

83,367

     

Trade receivables - net

139,669

141,393

Other receivables

26,766

25,764

Inventories:

   

Systems and components

80,576

77,557

Spare parts and supplies

46,008

45,385

Deferred income taxes

34,386

31,632

 

409,721

405,098

     
Investments and other non-current assets

10,729

9,372

Property and equipment - net

90,511

90,902

Goodwill and other intangible assets - net

57,955

60,136

 

$ 568,916

$ 565,508

      
Liabilities and Shareholders' Equity    

Current liabilities:

    

Short term debt

$ 16

$ 2,034

Trade payables

51,898

48,180

Accrued and other liabilities

102,434

109,588

  

154,348

159,802

     
Non-current liabilities

4,981

4,483

Shareholders' equity:     

Share capital

6,195

6,194

Capital surplus

360,833

360,316

Currency translation adjustments

1,548

1,064

Retained earnings

46,256

33,649

Treasury stock at cost

(5,245)

 
  

409,587

401,223

     
  

$ 568,916

$ 565,508