Arel Reports Results for the Fourth Quarter of 2003.Business Editors/High-Tech Writers YAVNE Yavne (Hebrew: יבנה, Arabic: يبنة Yibnah, Latin: Iamnia , Israel--(BUSINESS WIRE)--Feb. 12, 2004 Arel Communications and Software Limited (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : ARLC ARLC Automatic Revolving Letter of Credit ) -- Q4 revenues increased 15% sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen and 136% year over year to $3.05 million -- 2003 Revenues increased 70% to $10.1 million versus $5.9 million in 2002 Q4 EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. of $0.02 -- FY2003 EPS of $0.04 Arel Communications and Software Limited (NASDAQ: ARLC), technology leader in universal voice, video and data web communication for interactive conferencing/collaboration and training applications, announced that revenues for the fourth quarter of 2003 were $3.05 million, a 15 percent sequential One after the other in some consecutive order such as by name or number. increase and the fifth consecutive quarter of revenue growth. Revenues in the quarter increased 136 percent from $1.3 million reported in the fourth quarter of 2002. Net income for the 2003 fourth quarter was $303,000, or $0.02 per share on two million additional shares outstanding versus Q3. Net income in the third quarter of 2003 was $361,000, or $0.03 per share. Net loss in the fourth quarter of 2002 was $2.0 million, or $0.16 per share, which included $630,000 in restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). expenses and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of property and equipment. Excluding restructuring expenses, the net loss for the fourth quarter of 2002 was $1.4 million, or $0.11 per share. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the fourth quarter increased to $311,000 compared to $271,000 in the third quarter of 2003. The company reported an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $1.9 million in the fourth quarter of 2002. Philippe Szwarc, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Arel Communications and Software, said, "We are pleased to report continued strong revenue growth in the fourth quarter with another sequential improvement in operating income. During the quarter we continued to add important new customers such as Kroger The Kroger Co. (NYSE: KR) is an American retail supermarket chain and parent company, founded by Bernard Henry Kroger in 1883 in Cincinnati, Ohio. It reported over US$60 billion in sales during its most recent fiscal year and is the top grocery retailer in the country and and Countrywide coun·try·wide adv. & adj. Throughout a whole country; nationwide: launched a fundraising campaign countrywide; a countrywide search. Adj. 1. and further penetrate existing accounts. We are extremely satisfied with the market reception to our Integrated Conferencing See teleconferencing. Platform core software introduction and recently announced enhanced Spotlight Spotlight can refer to at least three types of lighting:
Contraction of we have. we've have received excellent feedback on our product enhancements. During the quarter, we began a controlled strategic increase in our sales and marketing expenses as we prepare to enter a new phase of even greater market opportunity." "Our results were impacted by some unusual items this quarter. Our gross margin declined to 65% as a result of our decision to write off slow-moving Adj. 1. slow-moving - moving slowly; "slow-moving cars" slow - not moving quickly; taking a comparatively long time; "a slow walker"; "the slow lane of traffic"; "her steps were slow"; "he was slow in reacting to the news"; "slow but steady growth" components. In addition, the decline in the dollar versus other currencies negatively impact financial income." For the year ended December December: see month. 31, 2003, revenues increased 70 percent to $10.1 million from $5.9 million in 2002. Net income for 2003 was $473,000 compared to a net loss of $13.7 million in 2002, which included amortization and impairment of goodwill, impairment of property and equipment and restructuring expenses totaling $7.44 million. Earnings per share improved significantly to $0.04 in 2003, compared with a net loss per share of $1.06 (including the amortization and impairment of goodwill, impairment of property and equipment and restructuring expenses) in 2002. Excluding these unusual items, the net loss per share was $0.48 in 2002. Cash and cash equivalents and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments at December 31, 2003, totaled $8.0 million. Our cash position in the fourth quarter (including a long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. investment of $500,000) stayed about even with the end of the third quarter. "Our financial outlook for 2004 is to continue our top line growth momentum," said Mr. Szwarc. "Our objective is to report steady sequential growth but, since our quarters consist of several relatively large deals with long sales cycles, there is always the potential for slight timing shifts to skew (1) The misalignment of a document or punch card in the feed tray or hopper that prohibits it from being scanned or read properly. (2) In facsimile, the difference in rectangularity between the received and transmitted page. quarterly results. 2004 will also be a year in which we invest aggressively to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. our competitive advantage in the market. Even with our investing in new marketing and business development initiatives and expanding our sales presence in all regions, we are expecting another profitable year." Arel management will hold a teleconference today, at 8:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . to discuss the quarterly results. To participate in the call please dial 800-450-0785 (in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ) or 612-332-0923 (internationally), approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. five minutes prior to the scheduled call start time. The call will also be available live as a webcast on www.arelcom.com, where it will be archived and available for replay. A digital replay of the conference call may also be accessed by dialing the following numbers: 800-475-6701 (in the United States.) or 320-365-3844 (internationally) and entering the following access code: 719478. About Arel Communications and Software: Arel Communications and Software, a technology leader in interactive web communications, develops, markets and sells a universal conferencing software solution for enterprise-wide deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. of integrated voice, video and data web conferencing/collaboration and training applications. Designed around Arel's Integrated Conferencing Platform(TM)(ICP (1) (Internet Cache Protocol) A protocol used by one proxy server to query another for a cached Web page without having to go to the Internet to retrieve it. See CARP and proxy server. ) core software, the Arel Spotlight(TM) application suite facilitates collaboration Working together on a project. See collaborative software. for key business processes such as corporate and marketing communications Marketing communications (or marcom) are messages and related media used to communicate with a market. Those who practice advertising, branding, direct marketing, graphic design, marketing, packaging, promotion, publicity, sponsorship, public relations, sales, sales , distance learning, product development, customer relationship management, and supply chain management by allowing dispersed dis·perse v. dis·persed, dis·pers·ing, dis·pers·es v.tr. 1. a. To drive off or scatter in different directions: The police dispersed the crowd. b. enterprise users to collaborate in real time with synchronized syn·chro·nize v. syn·chro·nized, syn·chro·niz·ing, syn·chro·niz·es v.intr. 1. To occur at the same time; be simultaneous. 2. To operate in unison. v.tr. 1. voice, video and data. Arel's scaleable, secure, and network-friendly universal conferencing solution is becoming the choice solution for large enterprises moving from 'off-network' pay per usage services to 'on-network' solutions for greater control, cost-savings and integration with internal systems. www.arelcom.com Certain statements made herein that are not historical are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. The words "estimate", "project", "intend", "expect", "believe", "hopeful" and similar expressions are intended to identify forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . These forward-looking statements involve known and unknown risks and uncertainties. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements, including, among others, changes in general economic and business conditions, inability to maintain market acceptance to the Company's products, inability to timely develop and introduce new technologies, products and applications, rapid changes in the market for the Company'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 partners, inability to attract and retain qualified personnel, inability to protect the Company's proprietary technology and risks associated with the Company's international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. and its location in Israel Israel, in the Bible Israel (ĭz`rēəl, ĭz`rāəl) [as understood by Hebrews,=he strives with God], according to the book of Genesis, name given to Jacob as eponymous ancestor of the Hebrews, the chosen people of God. . For additional information regarding these and other risks and uncertainties associated with the Company's business, reference is made to the Company's reports filed from time to time with the Securities and Exchange Commission.
AREL COMMUNICATIONS AND SOFTWARE LTD.
(An Israeli Corporation)
CONSOLIDATED BALANCE SHEETS
December 31,
-------------------
2003 2002
--------- ---------
U.S. dollars
in thousands
A s s e t s
CURRENT ASSETS:
Cash and cash equivalents 3,897 10,354
Short-term investments 4,106 129
Accounts receivable :
Trade 3,098 2,455
Other 614 434
Inventories 534 1,168
--------- ---------
T o t a l current assets 12,249 14,540
--------- ---------
INVESTMENT IN ARELNET LTD. 125 125
--------- ---------
PROPERTY AND EQUIPMENT:
Cost 2,085 2,183
L e s s - accumulated depreciation and
amortization 1,664 1,493
--------- ---------
421 690
--------- ---------
OTHER ASSETS 683 85
--------- ---------
T o t a l assets 13,478 15,440
========= =========
Liabilities and shareholders' equity
CURRENT LIABILITIES:
Short-term bank credit and current maturities
of long-term loan 52 27
Accounts payable and accruals:
Trade 489 801
Accrued restructuring costs 22 852
Deferred revenues 294 2,165
Other 3,718 3,157
--------- ---------
T o t a l current liabilities 4,575 7,002
--------- ---------
LONG-TERM LIABILITIES:
Liability for employee rights upon retirement, net
of amount
funded 391 371
Other 48
--------- ---------
T o t a l long-term liabilities 391 419
--------- ---------
T o t a l liabilities 4,966 7,421
--------- ---------
SHAREHOLDERS' EQUITY:
Share capital - ordinary shares of NIS 0.001 par value
(authorized - December 31, 2003 and December 31,
2002 30,000,000; issued and outstanding:
December 31, 2003 - 13,055,739 shares
and December 31, 2002 - 12,855,739 shares) 4 4
Capital surplus 52,760 52,740
Warrants and options 1,395 1,395
Accumulated deficit (45,647) (46,120)
--------- ---------
T o t a l shareholders' equity 8,512 8,019
--------- ---------
T o t a l liabilities and shareholders'
equity 13,478 15,440
========= =========
AREL COMMUNICATIONS AND SOFTWARE LTD.
(An Israeli Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Year ended
December 31 December 31
2003 2002 2003 2002
-------- -------- -------- -------
U.S. dollars in thousands
(except per share data)
REVENUES FROM SALES AND SERVICES 3,055 1,295 10,118 5,941
COST OF SALES AND SERVICES 1,082 639 3,701 3,604
-------- -------- -------- -------
GROSS PROFIT 1,973 656 6,417 2,337
RESEARCH AND DEVELOPMENT EXPENSES
- net 425 527 1,591 2,218
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES 1,237 1,366 4,195 6,439
AMORTIZATION OF GOODWILL 283
IMPAIRMENT OF GOODWILL 4,575
RESTRUCTURING EXPENSES AND
IMPAIRMENT OF PROPERTY AND
EQUIPMENT 630 2,301
-------- -------- -------- -------
OPERATING INCOME (LOSS) 311 (1,867) 631 (13,479)
FINANCIAL INCOME (EXPENSES)- net (8) (144) (158) 102
IMPAIRMENT OF INVESTMENT IN
ARELNET LTD. 279
-------- -------- -------- -------
INCOME (LOSS) FOR THE PERIOD 303 (2,011) 473 (13,656)
======== ======== ======== =======
BASIC AND DILUTED INCOME (LOSS)
PER SHARE $ 0.02 $ (0.16) $ 0.04 $ (1.06)
======== ======== ======== =======
NET INCOME ( LOSS) FOR THE PERIOD
AS REPORTED 303 (2,011) 473 (13,656)
ADJUSTMENTS TO RECONCILE NET LOSS
FOR THE PERIOD TO NET LOSS
EXCLUDING UNUSUAL ITEMS:
Amortization of goodwill 283
Impairment of goodwill 4,575
Restructuring expenses and
Impairment of Property and
Equipment 630 2,301
Impairment of investment in
Arelnet Ltd. 279
-------- -------- -------- -------
NET PROFIT (LOSS) EXCLUDING
UNUSUAL ITEMS: 303 (1,381) 473 (6,218)
======== ======== ======== =======
BASIC AND DILUTED LOSS PER SHARE
EXCLUDING
UNUSUAL ITEMS: $0.02 $(0.11) $0.04 $(0.48)
======== ======== ======== =======
WEIGHTED AVERAGE NUMBER OF
SHARES (IN THOUSANDS):
Basic 14,000 12,856 13,890 12,856
======== ======== ======== =======
Diluted 14,817 12,856 13,890 12,856
======== ======== ======== =======
AREL COMMUNICATIONS AND SOFTWARE LTD.
(An Israeli Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended
December 31,
2003 2002
-------- --------
-----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) for the year 473 (13,656)
Adjustments required to reconcile income (loss) to
net cash used in operating activities:
Depreciation and amortization of property and
equipment 318 588
Impairment of property and equipment 750
Amortization of goodwill 283
Impairment of goodwill 4,575
Employee stock-based compensation 20
Decline in value of investment in Arelnet Ltd. 279
Allowance for doubtful accounts (24) 170
Accrued employee rights upon retirement - net 20 60
Capital loss on disposal of property and
equipment 36
Loss (gain) on realization and changes in value
of marketable securities - net (10) 10
Other - net (7) 1
Changes in operating asset and liability items:
Decrease (increase) in trade receivables (before
allowance for doubtful accounts) (619) 880
Decrease (increase) in other accounts receivable (180) 245
Increase (decrease) in accounts payable and
accruals (including long-term) (2,452) 1,422
Decrease in inventories 634 1,097
-------- --------
Net cash used in operating activities (1,827) (3,260)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (78) (174)
Disposal of property and equipment 29
Proceeds from disposal of property and equipment 186
Investment in Arelnet Ltd.
Long-term bank deposit (500)
Amounts carried to other assets (100)
Collection of long-term loan to an employee 9 25
Short-term bank deposits - net (3,969) 8,172
Acquisition of marketable securities (6) (4)
Proceeds from sale of marketable securities 8 33
-------- --------
Net cash provided by (used in) investing activities (4,607) 8,238
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of warrants and options
Repayment of long-term loan (12) (1)
Short-term bank credit - net (11) (5)
-------- --------
Net cash used in financing activities (23) (6)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,457) 4,972
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 10,354 5,382
-------- --------
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF YEAR 3,897 10,354
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
CASH PAID DURING THE YEAR FOR:
Interest -,- 2
======== ========
Income taxes 30 81
======== ========
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