ECI Reports 11% Increase in Revenues for Second Quarter of 2006.PETACH TIKVA, 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. -- ECI Telecom ECI Telecom Ltd NASDAQ: ECIL, is a telecommunication equipment manufacturer based in Petah Tikva, Israel. Ltd. (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 : ECIL ECIL Electronics Corporation of India Limited ), a global provider of advanced telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. solutions to leading carriers and service providers, reported today that revenues for the quarter ended June June: see month. 30, 2006 reached $170 million, an 11% increase from the $153 million recorded in the second quarter of 2005 and a 5% increase over the first quarter 2006 revenues of $162 million. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net income for the second quarter of 2006 reached $9.6 million, or $0.08 per share on a fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis. This compares with second quarter 2005 net income of $15.6 million, or $0.13 per share and $3.1 million, or $0.03 per share in the first quarter of 2006. Results for the second quarter of 2005 included a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. $10.4 million gain on the sale of a receivable, a $3 million provision for an 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 a loan granted by the company, $0.9 million for acquired in process R&D and less than one month's results of Laurel Networks Laurel Networks was founded in 1999, and specialized in routers for telecommunications carriers. In 2005, they were purchased by ECI Telecom for $88m, and formally renamed as the Data Networking Division within ECI. , acquired in June 2005. In addition, results for the second quarter of 2006 include charges of an aggregate of $3.9 million for share-based compensation (as described below), which did not impact the results of the second quarter of 2005. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma , non-GAAP, net income for the second quarter of 2006 was $14.8 million, or $0.12 per diluted share, compared to $7.1 million, or $0.06 per fully diluted share in the first quarter of 2006. Results for the second quarter, both GAAP and pro forma non-GAAP, included a net gain of $4.1 million, or $0.03 per share, from the distribution of ECtel shares to ECI's shareholders in June 2006. Excluding the impact of this gain, pro forma-non GAAP- net income for the quarter was $10.7 million or $0.09 per fully diluted share and GAAP net income for the quarter was $5.6 million, or $0.05 per share. ECI's pro forma net income differs from results reported under U.S. GAAP due to adjustments made for the following on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" , non-cash items: --The amortization of acquired intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. . --The impact of share-based compensation. ECI ECI Employment Cost Index ECI Election Commission(er) of India ECI Enterprise Content Integration ECI Early Childhood Intervention ECI Environmental Change Institute has been providing non-GAAP results reflecting these adjustments, as applicable, since the third quarter of 2005. Please see the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. Tables 4 and 5 for a full reconciliation of GAAP to non-GAAP results. The results of operations provided by ECI, both GAAP and pro forma non-GAAP, include the impact of Veraz Networks, a private entity held 41% by ECI. ECI consolidates Veraz according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the equity method of accounting under "Company's equity in results of investee companies". As the financial statements of Veraz have not been available to ECI on a timely basis, starting from this quarter ECI is consolidating these results on a three month lag basis. In addition, ECI's results for the quarter reflect estimated accounting adjustments made by Veraz with respect to prior periods. These estimated adjustments, all of which are reflected in "Company's equity in results of investee companies," as well as the change in accounting principle noted above, are not material to ECI's results of operations. Both GAAP and pro forma non-GAAP net income figures presented in this release incorporate those estimates. Cash flow from operating activities totaled $9.1 million for the second quarter of 2006. As of June 30, 2006 and following the distribution of the ECtel shares, ECI Telecom's cash, including short and 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. deposits and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has , totaled $259 million, or $2.15 per share, with no debt. Revenues for the Optical Networks Division totaled $92 million for the second quarter of 2006, up 12% from the year ago period and compared to $89 million in the preceding quarter. 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 division reached $14.8 million, up 67% compared to the second quarter of 2005 and compared to $12.7 million in the first quarter. Strong demand for cellular backhaul (1) The original definition of backhaul was to transmit a telephone call or data beyond its normal destination point and then back again in order to utilize available personnel (operators, agents, etc.) or network equipment that is not located at the destination location. , particularly in emerging markets, continued to be a primary driver in the division's sales growth. Revenues for the Broadband Access See broadband and wireless broadband. Division totaled $66 million for the second quarter of 2006, up 5% from the year ago period and an increase of $5 million over the previous quarter. The increase in the division's revenues resulted primarily from the recognition for the first time of revenues related to successful delivery of the first phase of Deutsche Telekom's High Speed Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the project. Operating income for the division totaled $3.9 million, compared to $6.4 million in the year ago period and $5.9 million in the preceding quarter. Revenues for the Data Networking Division (formerly Laurel Networks) totaled $3 million for the second quarter of 2006, up from $2 million reported in the previous quarter, while the 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. was $10.9 million, compared to $9.5 million in the previous quarter, reflecting the still relatively low revenues and continued intensive research and development efforts currently underway in the division. Rafi RAFI Research Affiliates Fundamental Indexation RAFI Rural Advancement Foundation Intenational (Canada) Maor, ECI Telecom President and 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. stated, "The strength of our second quarter results reflect the continued success of our strategic positioning in key growth segments of the communications market, such as IPTV (Internet Protocol TV) Also called "TV over IP," IPTV delivers scheduled TV programs and video-on-demand (VOD) via the IP protocol and digital streaming techniques used to watch video on the Internet. and cellular backhaul, as well as a solid position in higher growth geographical markets- notably emerging markets in Asia and East Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). .
"ECI's Broadband Access division continued demonstrating technological leadership by being one of the first in the world to deploy next generation IPTV solutions in large-scale large-scale adj. 1. Large in scope or extent. 2. Drawn or made large to show detail. large-scale Adjective 1. wide-ranging or extensive 2. commercial projects. During the second quarter, we completed deliveries of phase one shipments for Deutsche Telekom's VDSL See DSL. VDSL - Very high bit-rate Digital Subscriber Line 2-based High Speed Internet project. This enables Deutsche Telekom Deutsche Telekom AG (ISIN: DE0005557508, FWB: DTE, NYSE: DT, LSE: DEU, TYO: 9496 ) (abbreviated DTAG) is a telecommunications company headquartered in Bonn, Germany. It is the largest telecommunications company in Germany and in the EU. to now offer its customers high definition television in addition to other advanced broadband services See broadband and broadband service provider. . We continued to deliver IPTV infrastructure solutions to France Telecom, providing a unique evolutionary path to offer next generation services by upgrading existing infrastructure. While we expect significant revenues from these deployments in the next few years, revenues in the division may be somewhat lower in the second half of the year, depending upon the rate of the deployment of our major customers. Overall, our competitive positioning in broadband access remains strong. "ECI's Optical Networks Division continues to demonstrate strong business momentum. Strong new cellular subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. growth in key emerging markets continued to drive strong demand for our cellular backhaul and wireline offerings. Highlighting this success, ECI was recently named by Voice and Data, a leading telecom magazine in India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. , as the largest transmission equipment vendor in India with a 31% market share. India is a key geographic market where cellular subscriber additions are currently estimated at approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 5 millions per month. ECI expanded its relationship with key customers including Bharti Bharti can refer to a number of Indian businesses:
People with the surname Hutchison:
 `krān, ykrān`), Ukr. Ukraina, republic (2005 est. pop. and Vimpelcom in Russia Russia, officially the Russian Federation, Rus. Rossiya, republic (2005 est. pop. 143,420,000), 6,591,100 sq mi (17,070,949 sq km). . We also secured new customers wins in
the Asia Pacific region such as South Korea's Dreamline Co., Ltd.,
a leading cellular and broadband service provider An ISP, telephone company, cable company or other carrier that offers high-speed communications to homes and businesses, typically for Internet access. Cable modems, DSL and T1 lines are the common technologies. See broadband, cable modem, DSL and T1. , Dreamline selected
ECI's advanced optical solutions to upgrade their cellular backhaul
network for 3G services.
"Our Data Networking Division experienced during the second quarter improved bookings and revenues and more importantly increased pipeline activity through both direct and indirect sales channels. We expect to continue to see increased order intake intake /in·take/ (in-tak´) the substances, or the quantities thereof, taken in and utilized by the body. intake, n the substance or quantities thereof taken in and used by the body. rates. Three weeks ago we announced the appointment of Tony Scarfo Scarfo were a British rock band formed in Andover, England in 1994 by former art college students Jamie Hince (vocals, guitar), Nick Prior (bass), and Al Saunders (drums). The band moved to London where they played many gigs, attracting the attention of Fierce Panda Records, who , a former senior executive at Juniper Networks Juniper Networks, Inc. (NASDAQ: JNPR) is an information technology company based in Sunnyvale, California and founded in 1996. The company designs and sells Internet Protocol network products and services. , as new General Manager of the division. The unique combination of our Broadband Access, Optical Networks and Data Networking expertise is central to our strategy of developing advanced IP-based solutions providing our customers a clear pathway pathway /path·way/ (path´wa) 1. a course usually followed. 2. the nerve structures through which an impulse passes between groups of nerve cells or between the central nervous system and an organ or muscle. to next generation converged network The integration of the telephone system with IP-based data networks. See softswitch. (networking) converged network - A single network that can carry voice, video and data. deployments," concluded Maor. Guidance Updating its guidance, ECI now expects revenues for the third quarter to be similar to those reported in the second quarter, due to an anticipated decline in revenues from its Broadband Access division, expected to be offset by strong growth in Optical Networks. Revenues in the fourth quarter of the year are expected to resume sequential One after the other in some consecutive order such as by name or number. growth. The company expects continued sequential growth in operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before both in the third as well as the fourth quarter, resulting in strong earnings growth for the year 2006. Veraz Networks (a private VoIP company in which ECI holds 41%) Veraz announcements in Q2 2006 included the launch of Belgacom The Belgacom Group, composed of Belgacom NV/SA and its subsidiaries, is the leading telecommunications company in Belgium. Group structure The Group is divided into three main fields of activity:
n. 1. (Chem.) A substance obtained from the residues of the distillation of petroleum, essentially the same as vaseline, but of somewhat stiffer consistency, and consisting of a mixture of the higher , an established Greek In desktop publishing, to display text in a representative form in which the actual letters are not discernible, because the screen resolution isn't high enough to display them properly. The software lets you set which font sizes should be greeked. telecommunications carrier, had selected Veraz's ControlSwitch(TM) softswitch A programmable network switch that can process the signaling for all types of packet protocols. Also known as a "media gateway controller," "call agent" or "call server," such devices are used by carriers that support converged communications services by integrating SS7 telephone to expand its switching network in Greece Greece, Gr. Hellas or Ellas, republic (2005 est. pop. 10,668,000), 50,944 sq mi (131,945 sq km), SE Europe. It occupies the southernmost part of the Balkan Peninsula and borders on the Ionian Sea in the west, on the Mediterranean Sea in the south, on . Veraz also announced that Gateway Communications had completed its network upgrade and expansion of its international long distance pan-African network for connectivity A generic term for connecting devices to each other in order to transfer data back and forth. It often refers to network connections, which embraces bridges, routers, switches and gateways as well as backbone networks. throughout Africa using the Veraz VoIP Switching solution. Results for the First Six Months For the first six months of 2006, revenues reached $332 million, an 11% increase from $298 million in the first half of 2005. The net profit was $12.7 million, or $0.11 per share on a fully diluted basis, compared to net income of $26 million, or $0.22 per share, for the first half of 2005, which had included the items mentioned above with respect to the second quarter and largely excluded the impact of Laurel Networks acquired in June 2005. A conference call to discuss ECI Telecom's second quarter 2006 financial results will take place today, Thursday Thursday: see week. , July July: see month. 27, 2006, at 8:30 am EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT , 3:30 pm Israel time. To access the conference call, please dial one of the following numbers: US: (888)-428-4471, International: +1 (612)-288-0337, Israel: 1-809-370-052 A replay option will be available after the conference call, from 12:00 pm EDT on July 27, 2006 through August 3, 2006, at 11:59pm EDT. Replay numbers: US: (800)-475-6701, Int A programming statement that specifies an interrupt or that declares an integer variable. See interrupt and integer. 1. (programming) int - A common name for the integer data type. In C for example, it means a (signed) integer of the computer's native word length. . +1 (320)-365-3844. Access code for both: 835875 A webcast of the conference call can be accessed on the ECI Telecom website at www.ecitele.com. A replay of the webcast will also be available on ECI Telecom's website. About ECI Telecom ECI provides advanced telecommunications solutions to leading carriers and service providers worldwide. By translating a deep understanding of their needs into innovative, technologically advanced solutions, ECI enables its customers to increase the value of the infrastructure of their networks and reduce operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . ECI's platforms provide carriers and service providers with carrier-grade solutions for easily introducing new revenue-generating services. ECI provides innovative IP service delivery solutions to the converged telecom networks encompassing broadband access gateways, service edge routers Also called an "access router," it is a router that sits at the periphery of a network. Contrast with "core router," which is a router that resides in the middle of the network. See router and WAN router. See also edge device. , optical transport, NGN (Next Generation Networks) An umbrella term for mixed voice and data networks running over the IP protocol. See IP Multimedia Subsystem. VoIP and multimedia applications and services. ECI maintains a global sales, marketing and customer support network, as well as a host of strategic channel relationships worldwide. Certain statements contained in this release may contain 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. information with respect to plans, projections, or future performance (including guidance on future financial performance) of the Company. By their nature, 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. involve certain risks and uncertainties including, but not limited to, the failure to occur of the anticipated fast growth of the broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). and cellular markets and our inability to respond to those changes if they occur, pricing pressures, our inability 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>. the Laurel Laurel, cities, United States Laurel. 1 Town (1990 pop. 19,438), Prince Georges co., central Md., about halfway between Washington, D.C., and Baltimore; patented in the late 1600s, inc. 1870. acquisition through new product introductions and increased sales of Laurel products through our sales network, risks relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the integration of Laurel's operations into our own, the impact of the newly adopted SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R regarding the expensing of option-based payments, which is expected to result in higher compensation expenses, actual revenues earned from announced contracts, the possibility of future net losses, rapid technological change in our markets, possible impact of customer dissatisfaction with some of our newer products, competitive factors, price erosion erosion (ĭrō`zhən), general term for the processes by which the surface of the earth is constantly being worn away. The principal agents are gravity, running water, near-shore waves, ice (mostly glaciers), and wind. in the market for certain of our products, dependence on large customers, fluctuations in our quarterly and annual results, risks associated with international sales, risks relating to our intellectual property, the failure of the geographic and product markets in which we sell to grow as anticipated, unexpected tax demands, currency fluctuations, potentially disruptive disruptive /dis·rup·tive/ (-tiv) 1. bursting apart; rending. 2. causing confusion or disorder. acquisitions, dependence on limited suppliers and subcontractors, as well as risks related to operations in Israel, and other risks detailed in the Company's annual report on Form 20-F for the year ended December December: see month. 31, 2005 and other filings with the Securities and Exchange Commission.
TABLE - 1
ECI TELECOM LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions of U.S. dollars, except per share figures)
Three
Months
Three Months Six Months ended
Ended Ended March
June 30, June 30, 31,
--------------- --------------- --------
2006 2005 2006 2005 2006
------- ------- ------- ------- --------
Revenues 170.3 152.9 332.3 298.3 162.0
Cost of revenues 103.3 86.5 200.3 172.0 97.0
------- ------- ------- ------- --------
Gross profit 66.9 66.4 131.9 126.3 65.0
Research and development
costs, net 25.4 21.1 50.4 38.9 25.1
Selling and marketing
expenses 24.2 24.1 46.1 45.4 21.9
General and administrative
expenses 11.5 10.6 24.1 20.8 12.6
Amortization of acquisition-
related intangible assets 1.3 0.5 2.5 0.5 1.2
Recovery of doubtful debt - (10.4) - (10.4) -
Impairment of loans - 3.0 - 3.0 -
Acquired in-process research
and development - 0.9 - 0.9 -
------- ------- ------- ------- --------
Operating income 4.6 16.7 8.8 27.2 4.2
Financial income, net 2.4 1.2 4.6 2.0 2.2
Other income (expenses), net 4.5 (0.3) 4.5 0.4 (0.0)
------- ------- ------- ------- --------
Income from continuing
operations before taxes on
income 11.5 17.5 17.8 29.7 6.3
Taxes on income (1.2) (0.9) (2.2) (1.9) (1.0)
------- ------- ------- ------- --------
Income from continuing
operations after taxes on
income 10.3 16.6 15.6 27.8 5.3
Company's equity in results
of investee companies (0.7) (0.7) (2.9) (1.5) (2.2)
Minority interest 0.0 (0.4) 0.0 (0.3) 0.0
------- ------- ------- ------- --------
Net income 9.6 15.6 12.7 26.0 3.1
======= ======= ======= ======= ========
Basic earnings per share
------- ------- ------- ------- --------
Net earnings per ordinary
share ($) 0.08 0.14 0.11 0.24 0.03
======= ======= ======= ======= ========
Weighted average number of
shares outstanding used to
compute basic earnings per
share - in millions 116.1 110.1 114.7 109.9 113.3
======= ======= ======= ======= ========
Diluted earnings per share
------- ------- ------- ------- --------
Net earnings per ordinary
share ($) 0.08 0.13 0.11 0.22 0.03
======= ======= ======= ======= ========
Weighted average number of
shares outstanding used to
compute diluted earnings
per share - in millions 120.5 117.8 119.7 117.6 119.0
======= ======= ======= ======= ========
TABLE - 2
ECI TELECOM LTD.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions of U.S. dollars)
March December
June 30, 31, 31,
2006 2006 2005
-------- -------- --------
Assets
Current Assets
----------------------------------------
Cash and cash equivalents 84.9 72.1 63.8
Short-term investments 70.8 48.3 41.3
Trade Receivables 163.4 168.1 152.8
Other receivables and prepaid expenses 36.0 28.6 28.4
Work in progress 3.5 3.2 2.9
Inventories 148.7 150.9 147.0
-------- -------- --------
Total current assets 507.3 471.3 436.2
-------- -------- --------
Long-term receivables, net 8.5 7.7 8.3
-------- -------- --------
Long-term deposits and marketable
securities 103.0 146.9 140.0
-------- -------- --------
Assets held for severance benefits 24.9 26.3 25.9
-------- -------- --------
Investments 16.3 17.1 19.8
-------- -------- --------
Property, plant and equipment, net 121.1 120.0 119.6
-------- -------- --------
Software development costs, net 11.3 11.6 12.0
-------- -------- --------
Goodwill 39.3 39.3 39.3
-------- -------- --------
Other assets 45.2 46.5 47.7
-------- -------- --------
-------- -------- --------
Total assets 877.1 886.6 848.7
======== ======== ========
Liabilities and shareholders' equity
Current liabilities
----------------------------------------
Trade payables 77.1 71.0 56.5
Other payables and accrued liabilities 122.2 132.4 120.5
-------- -------- --------
Total current liabilities 199.3 203.4 177.0
-------- -------- --------
Long-term liabilities
----------------------------------------
Other liabilities 1.0 0.2 0.2
Liability for employee severance benefits 46.2 47.8 48.3
-------- -------- --------
Total long-term liabilities 47.2 48.1 48.5
-------- -------- --------
-------- -------- --------
Total liabilities 246.6 251.5 225.5
-------- -------- --------
Minority Interest 4.1 4.1 4.1
-------- -------- --------
Shareholders' equity
----------------------------------------
Share capital 6.4 6.4 6.3
Capital surplus 652.7 659.7 648.5
Accumulated other comprehensive
income (loss) (1.2) 6.0 8.5
Accumulated deficit (31.5) (41.1) (44.2)
-------- -------- --------
Total shareholders' equity 626.4 631.0 619.1
-------- -------- --------
-------- -------- --------
Total Liabilities and shareholders' equity 877.1 886.6 848.7
======== ======== ========
TABLE - 3
ECI TELECOM LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of U.S. dollars)
Three
Months
Three Months Six Months ended
Ended Ended March
June 30, June 30, 31,
---------------- --------------- -------
2006 2005 2006 2005 2006
------- -------- ------- ------- -------
Cash flows from operating
activities
Net income 9.6 15.6 12.7 26.0 3.1
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation and
amortization 9.2 8.6 18.8 18.4 9.6
Share-based payments
expenses 3.9 - 6.7 0.0 2.8
Capital Losses (gains), net (4.2) (0.1) (4.0) (2.6) 0.1
Impairment of loans - 3.0 - 3.0 -
Other, net (2.9) 2.7 (2.2) 3.9 0.7
Acquired in-process research
and development costs - 0.9 - 0.9 -
Company's equity in results
of investee companies 0.7 0.7 2.9 1.5 2.2
Minority interest 0.0 0.4 0.0 0.3 0.0
Decrease (increase) in
working capital (including
non-current maturities of
trade receivables) (6.3) 85.3 (3.3) 77.0 3.1
Increase (decrease) in other
long-term liabilities 0.8 (0.0) 0.8 (0.0) 0.1
Decrease in liability for
employee severance benefits (1.6) (2.4) (2.1) (3.8) (0.5)
------- -------- ------- ------- -------
Net cash provided by
operating activities 9.1 114.5 30.3 124.6 21.2
------- -------- ------- ------- -------
Cash flows provided by (used
in) investing activities
Investments in deposits, net 0.0 1.8 0.4 (0.6) 0.3
Software development costs
capitalized (1.7) (1.8) (3.5) (4.3) (1.8)
Investment in property,
plant and equipment (7.2) (3.7) (13.6) (9.2) (6.5)
Proceeds from sale of
property, plant and
equipment 0.2 0.2 0.5 0.6 0.3
Acquisition of investee
companies - (0.5) (0.3) (0.5) (0.3)
Proceeds from realization of
an investee company - - - 2.4 -
Repayment of long term loans
granted 0.1 - 0.2 - 0.2
Acquisition of an operation - (5.4) - (5.4) -
Acquisition of newly
consolidated subsidiary - (84.7) - (84.7) -
Investments in marketable
securities, net 7.3 (7.7) (5.8) (8.9) (13.0)
Changes in assets held for
severance benefits 3.0 (0.2) 2.6 0.1 (0.4)
------- -------- ------- ------- -------
Net cash provided by (used
in) investing activities 1.7 (101.9) (19.4) (110.4) (21.1)
------- -------- ------- ------- -------
Cash flows provided by (used
in) financing activities
Repayment of loans from
banks - - - (30.0) -
Exercise of stock options 1.6 2.1 10.0 2.6 8.5
Share issuance - 0.0 - 0.0 -
------- -------- ------- ------- -------
Net cash provided by (used
in) financing activities 1.6 2.2 10.0 (27.3) 8.5
------- -------- ------- ------- -------
Effect of change in exchange
rate on cash 0.4 (0.7) 0.2 (1.0) (0.2)
------- -------- ------- ------- -------
Net increase (decrease) in
cash and cash equivalents 12.8 14.1 21.1 (14.2) 8.3
Cash and cash equivalents at
beginning of period 72.1 45.9 63.8 74.2 63.8
------- -------- ------- ------- -------
Cash and cash equivalents at
end of period 84.9 60.0 84.9 60.0 72.1
======= ======== ======= ======= =======
TABLE - 4
ECI TELECOM LTD.
AND SUBSIDIARIES
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
This schedule is to assist the reader in reconciling from the GAAP
reported results to Proforma results
(In millions of U.S. dollars, except per share figures)
Three months ended June, 30
2006
--------------------------------------
GAAP Proforma Proforma
Reported Adjustments
----------- ------------ ---------
Revenues 170.3 170.3
Cost of revenues 103.3 (0.4)(*) 103.0
----------- --------- ---------
Gross profit 66.9 0.4 67.3
Research and development
costs, net 25.4 (1.4)(*) 24.0
Selling and marketing
expenses 24.2 (0.8)(*) 23.4
General and administrative
expenses 11.5 (1.3)(*) 10.2
Amortization of
acquisition-related
intangible assets 1.3 (1.3) -
----------- --------- ---------
Operating income 4.6 5.1 9.7
Financial income ,net 2.4 2.4
Other income (expenses),
net 4.5(**) 4.5(**)
----------- --------- ---------
Income from continuing
operations before taxes
on income 11.5 5.1 16.6
Taxes on income (1.2) (1.2)
----------- --------- ---------
Income from continuing
operations after taxes on
income 10.3 5.1 15.4
Company's equity in
results of investee
companies (0.7) (0.7)
Minority interest 0.0 0.0
----------- --------- ---------
Net income 9.6 5.1 14.8
=========== ========= =========
Basic earnings per share
----------- --------- ---------
Net earnings per ordinary
share ($) 0.08 0.04 0.13
=========== ========= =========
Weighted average number of
shares outstanding used
to compute basic earnings
per share - in millions 116.1 116.1 116.1
=========== ========= =========
Diluted earnings per share
----------- --------- ---------
Net earnings per ordinary
share ($) 0.08 0.04 0.12
=========== ========= =========
Weighted average number of
shares outstanding used
to compute diluted
earnings per share - in
millions 120.5 120.5 120.5
=========== ========= =========
Three months ended March, 31
2006
--------------------------------------
GAAP Proforma Proforma
Reported Adjustments
----------- ------------ ---------
Revenues 162.0 162.0
Cost of revenues 97.0 (0.3)(*) 96.7
----------- --------- ---------
Gross profit 65.0 0.3 65.3
Research and development
costs, net 25.1 (0.9)(*) 24.2
Selling and marketing
expenses 21.9 (0.6)(*) 21.3
General and administrative
expenses 12.6 (1.1)(*) 11.6
Amortization of
acquisition-related
intangible assets 1.2 (1.2) -
----------- --------- ---------
Operating income 4.2 4.1 8.2
Financial income ,net 2.2 2.2
Other income (expenses),
net (0.0) (0.0)
----------- --------- ---------
Income from continuing
operations before taxes
on income 6.3 4.1 10.4
Taxes on income (1.0) (1.0)
----------- --------- ---------
Income from continuing
operations after taxes on
income 5.3 4.1 9.3
Company's equity in
results of investee
companies (2.2) (2.2)
Minority interest 0.0 0.0
----------- --------- ---------
Net income 3.1 4.1 7.1
=========== ========= =========
Basic earnings per share
----------- --------- ---------
Net earnings per ordinary
share ($) 0.03 0.04 0.06
=========== ========= =========
Weighted average number of
shares outstanding used
to compute basic earnings
per share - in millions 113.3 113.3 113.3
=========== ========= =========
Diluted earnings per share
----------- --------- ---------
Net earnings per ordinary
share ($) 0.03 0.03 0.06
=========== ========= =========
Weighted average number of
shares outstanding used
to compute diluted
earnings per share - in
millions 119.0 119.0 119.0
=========== ========= =========
(*) Share based compensation.
(**) Includes $4.1 million gain from distribution of ECtel shares as
dividend in kind.
TABLE - 5
ECI TELECOM LTD.
AND SUBSIDIARIES
ADJUSTED CONSOLIDATED STATEMENTS OF OPERATIONS
This schedule is to assist the reader in reconciling from the GAAP
reported results to Proforma results
(In millions of U.S. dollars, except per share figures)
Six months ended June, 30
2006
--------------------------------------
GAAP Proforma Proforma
Reported Adjustments
--------- ----------- ----------
Revenues 332.3 332.3
Cost of revenues 200.3 (0.7)(*) 199.7
--------- ----------- ----------
Gross profit 131.9 0.7 132.6
Research and development
costs, net 50.4 (2.3)(*) 48.1
Selling and marketing
expenses 46.1 (1.4)(*) 44.7
General and administrative
expenses 24.1 (2.3)(*) 21.8
Amortization of acquisition-
related intangible assets 2.5 (2.5) -
--------- ----------- ----------
Operating income 8.8 9.2 17.9
Financial income, net 4.6 4.6
Other income, net 4.5 (**) 4.5 (**)
--------- ----------- ----------
Income from continuing
operations before taxes on
income 17.8 9.2 27.0
Taxes on income (2.2) (2.2)
--------- ----------- ----------
Income from continuing
operations after taxes on
income 15.6 9.2 24.8
Company's equity in results
of investee companies (2.9) (2.9)
Minority interest 0.0 0.0
--------- ----------- ----------
Net income 12.7 9.2 21.9
========= =========== ==========
Basic earnings per share
--------- ----------- ----------
Net earnings per ordinary
share ($) 0.11 0.08 0.19
========= =========== ==========
Weighted average number of
shares outstanding used to
compute basic earnings per
share - in millions 114.7 114.7 114.7
========= =========== ==========
Diluted earnings per share
--------- ----------- ----------
Net earnings per ordinary
share ($) 0.11 0.08 0.18
========= =========== ==========
Weighted average number of
shares outstanding used to
compute diluted earnings
per share - in millions 119.7 119.7 119.7
========= =========== ==========
(*) Share based compensation.
(**) Includes $4.1 million gain from distribution of ECtel shares as
dividend in kind.
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