GILTF Gilat Satellite Networks Ltd. (MM)

Gilat Satellite Networks Ltd. (Nasdaq:GILTF), a worldwide leader in satellite networking technology, today reported its results for the quarter ending September 30, 2005. Revenues for the third quarter of 2005 were US$49.0 million, EBITDA(3) of US$4.0 million and net loss was US$(0.9) million or US$(0.04) diluted per share. By comparison, revenues for the third quarter of 2004 were US$64.7 million, EBITDA of US$8.4 million and net loss was US$(0.2) million or US$(0.01) diluted per share. Revenues for the nine month period ended September 30, 2005 were US$153.4 million, EBITDA of US$13.9 million and net loss was US$(2.5) million or US$(0.11) diluted per share. By comparison, revenues for the nine-month period ended September 30, 2004 were US$179.7 million, EBITDA of US$17.3 million and net loss was US$(8.5) million or US$(0.38) diluted per share. The Company also announced its decision to include further financial information within its earnings reports. This can be seen in the additional statements provided of cash flow and EBITDA. Gilat Chief Executive Officer and Chairman of the Board Amiram Levinberg said, "This quarter we shipped approximately 30% more in VSAT units than last quarter. In addition, this is the first quarter that we have shipped more SkyEdge VSATs than Skystar 360E. Some of these shipments are part of transactions that include the provision of bundled equipment, solutions and services, all in line with our corporate strategy of progressing upward on the value chain in project implementation. The consideration underlying some of these agreements is not included in our revenues for this quarter and has increased our backlog." About Gilat Satellite Networks Ltd. Gilat Satellite Networks Ltd. (Nasdaq:GILTF) is a leading provider of products and services for satellite-based communications networks. The Company operates under two business units: (i) Gilat Network Systems ("GNS"), a provider of network systems and associated professional services to service providers and operators and (ii) Spacenet, a provider of managed services for businesses and governments through its Connexstar service brand, for consumers through its StarBand service brand and for rural communities through Spacenet Rural Communications. Gilat was founded in 1987 and has shipped over 550,000 Very Small Aperture Terminals (VSATs) to more than 85 countries across six continents. Gilat's headquarters is located in Petah Tikva, Israel. The Company has 14 local offices and 3 service facilities worldwide. Gilat markets the SkyEdge (TM) Product Family which includes the SkyEdge(TM) Pro, SkyEdge(TM) IP, SkyEdge(TM) Call, SkyEdge(TM) DVB-RCS and SkyEdge(TM) Gateway. In addition, the Company markets numerous other legacy products. Visit Gilat at www.gilat.com Notes: -0- *T 1) Certain statements made herein that are not historical are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. The words "estimate," "project," "intend," "expect," "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties. Many factors could cause the actual results, performance or achievements of Gilat to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, inability to maintain market acceptance to Gilat's products, inability to timely develop and introduce new technologies, products and applications, rapid changes in the market for Gilat's products, loss of market share and pressure on prices resulting from competition, introduction of competing products by other companies, inability to manage growth and expansion, loss of key OEM partners, inability to attract and retain qualified personnel, inability to protect the Company's proprietary technology and risks associated with Gilat's international operations and its location in Israel. For additional information regarding these and other risks and uncertainties associated with Gilat's business, reference is made to Gilat's reports filed from time to time with the Securities and Exchange Commission. 2) The attached summary financial statements were prepared in accordance with U.S. GAAP. The attached summary financial statements for Q3 2005 are unaudited. 3) Operating loss before depreciation, amortization and exceptional items, ('EBITDA') is presented because it is a measure commonly used and is presented solely in order to improve the understanding of the Company's operating results and to provide further perspective on these results. EBITDA, however, should not be considered as an alternative to operating loss or net loss for the period as an indicator of the operating performance of the Company. Similarly, EBITDA should not be considered as an alternative to cash flows from operating activities as a measure of liquidity. EBITDA is not a measure of financial performance under generally accepted accounting principles and may not be comparable to other similarly titled measures for other companies. EBITDA may not be indicative of the historic operating results of the Company; nor is it meant to be predictive of potential future results. Reconciliation between the Company's Operating loss and EBIDTA is presented in the attached summary financial statements. *T -0- *T GILAT SATELLITE NETWORKS LTD. CONDENSED CONSOLIDATED BALANCE SHEET US dollars in thousands September 30, December 31, ------------- ------------- 2005 2004 ------------- ------------- Unaudited Unaudited ------------- ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents 64,678 75,771 Short-term restricted cash 18,047 14,168 Restricted cash held by trustees 6,533 10,620 Trade receivables (net of allowance for doubtful accounts) 31,299 31,380 Inventories 19,425 23,277 Receivables in respect of capital leases, prepaid expenses and other accounts receivable 25,083 27,413 ------------- ------------- Total current assets 165,065 182,629 ------------------------------------------ ------------- ------------- LONG-TERM INVESTMENTS AND RECEIVABLES: Long-term restricted cash 9,000 7,534 Long-term restricted cash held by trustees 17,789 18,994 Severance pay fund 8,345 7,933 Long-term trade receivables, receivables in respect of capital leases and other receivables, net 27,278 27,728 ------------- ------------- 62,412 62,189 ------------- ------------- PROPERTY AND EQUIPMENT, NET 127,722 137,198 ------------- ------------- INTANGIBLE ASSETS AND DEFERRED CHARGES, NET 11,699 9,432 ------------- ------------- TOTAL ASSETS 366,898 391,448 ------------------------------------------ ============= ============= GILAT SATELLITE NETWORKS LTD. CONDENSED CONSOLIDATED BALANCE SHEET US dollars in thousands September 30, December 31, ------------- ------------- 2005 2004 ------------- ------------- Unaudited Unaudited ------------- ------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short-term bank credit 11,436 4,159 Current maturities of long-term loans 13,664 8,869 Trade payables 19,105 21,245 Accrued expenses 22,646 28,011 Short-term advances from customer held by trustees 14,775 13,500 Other accounts payable 33,462 40,048 ------------- ------------- Total current liabilities 115,088 115,832 ------------------------------------------ ------------- ------------- LONG-TERM LIABILITIES: Accrued severance pay 8,374 8,172 Long-term advances from customer held by trustees 31,119 40,226 Long-term loans, net of current maturities 94,725 108,182 Accrued interest related to restructured debt 13,350 16,793 Other long-term liabilities 17,801 15,951 Excess of losses over investment in affiliates 720 2,102 Convertible subordinated notes 16,333 16,171 ------------- ------------- Total long-term liabilities 182,422 207,597 ------------------------------------------ ------------- ------------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Share capital - Ordinary shares of NIS 0.2 par value 995 984 Additional paid in capital 719,633 718,096 Accumulated other comprehensive loss (321) (2,624) Accumulated deficit (650,919) (648,437) ------------- ------------- Total shareholders' equity 69,388 68,019 ------------------------------------------ ------------- ------------- Total liabilities and shareholders' equity 366,898 391,448 ------------------------------------------ ============= ============= GILAT SATELLITE NETWORKS LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands (except per share data) Nine months ended Three months ended September 30, September 30, ---------------------------------------- 2005 2004 2005 2004 --------- --------- ---------- --------- Unaudited Unaudited Unaudited Unaudited --------- --------- ---------- --------- Revenues 153,437 179,697 49,029 64,749 Cost of Revenues 98,554 124,324 30,024 43,576 Write-off of inventories - 2,000 - - --------- --------- ---------- --------- Gross profit 54,883 53,373 19,005 21,173 --------- --------- ---------- --------- Research and development expenses: Expenses incurred 13,039 14,048 4,139 4,807 Less - grants 2,586 4,445 326 1,969 --------- --------- ---------- --------- 10,453 9,603 3,813 2,838 --------- --------- ---------- --------- Selling, marketing, general and administrative expenses 45,193 52,015 15,625 17,475 Impairment of tangible and intangible assets - 2,161 - 2,161 Gain from derecognition of liability - (245) - - --------- --------- ---------- --------- Operating loss (763) (10,161) (433) (1,301) --------- --------- ---------- --------- Financial income (expenses)- net 394 2,839 (60) 1,767 Other income (expenses) 140 (192) (68) (192) --------- --------- ---------- --------- Income (loss) before taxes on income (229) (7,514) (561) 274 --------- --------- ---------- --------- Taxes on income 2,653 2,696 374 906 --------- --------- ---------- --------- Loss after taxes on income (2,882) (10,210) (935) (632) --------- --------- ---------- --------- Equity in profits of affiliated companies 400 937 - 450 Minority interest in losses of a subsidiary - 164 - - --------- --------- ---------- --------- Net loss from continuing operations (2,482) (9,109) (935) (182) --------- --------- ---------- --------- Gain from cumulative effect of a change in an accounting principle - 611 - - --------- --------- ---------- --------- Net loss (2,482) (8,498) (935) (182) ========= ========= ========== ========= Basic net loss per share (0.11) (0.38) (0.04) (0.01) ========= ========= ========== ========= Diluted net loss per share (0.11) (0.38) (0.04) (0.01) ========= ========= ========== ========= Shares used in basic net loss per share computation 22,401 22,227 22,502 22,230 ========= ========= ========== ========= Shares used in diluted net loss per share computation 22,401 22,227 22,502 22,230 ========= ========= ========== ========= GILAT SATELLITE NETWORKS LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS US dollars in thousands Nine months ended Three months ended September 30, September 30, -------------------- ------------------- 2005 2004 2005 2004 ---------- --------- --------- --------- Unaudited Unaudited Unaudited Unaudited -------------------- ------------------- Cash flows from operating activities: ----------------------------- Net loss (2,482) (8,498) (935) (182) Adjustments required to reconcile net loss to net cash used in operating activities: Depreciation and amortization 14,652 23,537 4,445 7,565 Non cash cumulative effect relating to a subsidiary - (198) - - Loss from deconsolidation of subsidiaries 171 192 171 192 Stock compensation relating to option in a subsidiary - (763) - - Stock compensation relating to options issued to consultants 338 177 226 (95) Equity in losses of affiliated companies (400) (937) - (450) Accrued severance pay, net (210) 516 138 104 Interest accrued on short and long-term restricted cash (384) (1,448) (156) (1,121) Exchange rate on long-term loans (846) (143) (23) 87 Minority interest in losses of a subsidiary - (164) - - Exchange rate on loans to employees 224 - 34 - Impairment of property and equipment and other tangible assets - 2,201 - 2,201 Capital loss from disposal of property and equipment 300 - 2 - Deferred income taxes, net (249) 1,294 (64) 434 Decrease (increase) in trade receivables (16) (569) (1,334) 1,495 Decrease (increase) in Receivables in respect of capital leases, prepaid expenses and other accounts receivable (Including long-term) 4,383 6,722 (671) 622 Decrease (increase) in inventories 414 (3,651) (840) 1,577 Write-off of inventories - 2,000 - - Increase (decrease) in trade payables (2,158) (8,175) 3,041 (5,805) Increase (decrease) in accrued expenses (8,696) (10,943) (3,828) 1,696 Decrease in other accounts payable and other long-term liabilities (3,080) (372) (2,339) (26) Increase (decrease) in advances from customers held in trustees, net (7,832) 17,359 (3,218) (1,484) ---------- --------- --------- --------- Net cash provided by (used in) operating activities (5,871) 18,137 (5,351) 6,810 ---------- --------- --------- --------- Cash flows from investing activities: ----------------------------- Purchase of property and equipment (2,926) (4,485) (715) (659) Purchase of minority shares of rStar - (1,053) - - Deconsolidation of subsidiaries (181) 2,592 (181) - Investment in short-term bank deposits - (443) - - Proceeds from short-term bank deposits - 442 - 442 Disposal of subsidiaries - 600 - 600 Proceeds from disposal of Fixed Assets 8 - - - Loans to employees - Net (3,681) - 46 - Investment in restricted cash held by trustee (2,245) (23,501) (207) (1,075) Proceeds from restricted cash held by trustee 7,921 18,794 811 10,590 Investment in restricted cash (12,639) (9,202) (2,057) (448) Investment in other assets (93) (44) (49) (17) Proceeds from restricted cash 7,424 8,196 4,600 3,923 ---------- --------- --------- --------- Net cash provided by (used in) investing activities (6,412) (8,104) 2,248 13,356 ---------- --------- --------- --------- Cash flows from financing activities: ----------------------------- Exercise of options, net 1,210 23 371 - Short-term bank credit, net 7,277 1,137 (8) (2,486) Repayments of long-term loans (7,816) (2,314) (5,944) (1,267) ---------- --------- --------- --------- Net cash provided by (used in) financing activities 671 (1,154) (5,581) (3,753) ---------- --------- --------- --------- Effect of exchange rate changes on cash and cash equivalents 519 7 186 34 ---------- --------- --------- --------- Increase (decrease) in cash and cash equivalents (11,093) 8,886 (8,498) 16,447 Cash and cash equivalents at the beginning of the period 75,771 51,781 73,176 44,220 ---------- --------- --------- --------- Cash and cash equivalents at the end of the period 64,678 60,667 64,678 60,667 ========== ========= ========= ========= GILAT SATELLITE NETWORKS LTD. CONDENSED EBITDA US dollars in thousands Nine months ended Three months ended September 30, September 30, ------------------- ------------------- 2005 2004 2005 2004 --------- --------- --------- --------- Unaudited Unaudited Unaudited Unaudited ------------------- ------------------- Operating loss (763) (10,161) (433) (1,301) Less: Write-off of inventory - 2,000 - - Impairment of tangible and intangible assets - 2,161 - 2,161 Gain from derecognition of liability - (245) - - Deprecation and amortization 14,652 23,537 4,445 7,565 --------- --------- --------- --------- EBITDA 13,889 17,292 4,012 8,425 ========= ========= ========= ========= *T