Elron Electronic Industries Announces Significant Decrease in Net Loss in the Second Quarter and First Half of 2003.Business Editors TEL AVIV Tel Aviv (tĕl əvēv`), city (1994 pop. 355,200), W central Israel, on the Mediterranean Sea. Oficially named Tel Aviv–Jaffa, it is Israel's commercial, financial, communications, and cultural center and the core of its largest , Israel--(BUSINESS WIRE)--Aug. 13, 2003 Elron Electronic Industries Ltd. (Nasdaq:ELRN) today reported a net loss of $3.4 million, or $0.12 per share, for the second quarter of 2003 compared to a net loss of $15.2 million, or $0.59 per share, in the second quarter of 2002. The net loss in the first six months of 2003 amounted to $12.0 million, or $0.41 per share, compared to a net loss of $23.4 million or $1.00 per share in the first six months of 2002. The results of the second quarter and the first half of 2003 give effect to the merger with Elbit Ltd., the share purchase of DEP DEP Deposit DEP Deputy DEP Department of Environmental Protection DEP Dependent DEP Departure DEP Depot DEP Deposition DEP deployed (US DoD) DEP Data Execution Prevention (computer security) and the purchase of a controlling interest controlling interest The ownership of a quantity of outstanding corporate stock sufficient to control the actions of the firm. Controlling interest often involves ownership of significantly less than 51% of a firm's outstanding stock because many owners fail in each of Galil Medical and Mediagate, all of which occurred during or after the end of the second quarter of 2002. The 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 net loss for the second quarter and the first half of 2002 which gives effect to these transactions as if they had been in effect at January January: see month. 1, 2002 amounted to $18.7 million, or $0.64 per share, and $36.5 million, or $1.25 per share, respectively. Factors contributing to Elron's results in the second quarter of 2003 and operational highlights: Elron's net loss for the three and six month periods ended June June: see month. 30, 2003 decreased significantly as compared to the net loss in the same periods of 2002 mainly as a result of the following factors:
(i) a gain, after tax, of approximately $3.2 million, resulting
from the sale of 3,500,000 shares of Partner Communications
Company Ltd. (Nasdaq: PTNR) during the second quarter of 2003;
(ii) as part of the reorganization of Elron, Elbit, and DEP
following the completion of the merger with Elbit and the DEP
share purchase, certain Elbit and DEP group companies which
contributed $6.1 million and $8.4 million to the loss in the
three and six month periods ended June 30, 2002, respectively,
were sold or discontinued their operations; and
(iii) a decrease of approximately $3.1 million and $4.1 million in
the three and six month periods ended June 30, 2003,
respectively, as compared to the same periods of 2002, in losses
recorded with respect to certain group companies, mainly Elron
Software and Elron TeleSoft, as a result of restructuring and
cost reduction programs undertaken by them during 2002 and the
first half of 2003 which enabled these companies to reduce their
losses despite the adverse economic and market conditions.
The following are the main second quarter events: -- On June 1, 2003, Wavion, in which Elron previously held approximately 45%, completed a financing round led by Sequoia sequoia (sĭkwoi`ə), name for the redwood (Sequoia sempervirens) and for the big tree, or giant sequoia (Sequoiadendron giganteum), both huge, coniferous evergreen trees of the bald cypress family, and for extinct related species. Seed Capital, raising $6 million out of which Elron invested $2 million. Following the financing round and the conversion of loans previously granted to Wavion by Elron, Elron holds approximately 52% of Wavion. Wavion, founded in 2000 by entrepreneurs together with Elron, specializes in the development of "smart antenna Smart antenna (also known as adaptive array antennas, multiple antennas and recently MIMO) refers to a system of antenna arrays with smart signal processing algorithms that are used to identify spatial signal signature such as the direction of arrival (DOA) of the signal, and use " technology to enhance the performance of wireless systems. -- On July July: see month. 1, 2003, Galil Medical, in which Elron directly and indirectly holds approximately 33%, announced the completion of the merger of its urology urology Medical specialty dealing with the urinary system and male reproductive organs. It traces its origin to medieval lithologists, itinerant healers who specialized in surgical removal of bladder stones. business with the brachytherapy brachytherapy /brachy·ther·a·py/ (-ther´ah-pe) treatment with ionizing radiation whose source is applied to the surface of the body or within the body a short distance from the area being treated. business of Amersham plc Amersham plc was a UK pharmaceutical company, specializing in medical diagnostics and life science products. The company was formed in 1997 by merging Amersham International (U.K.), Pharmacia Biotech (Sweden) and Nycomed (Norway). (LSE LSE - Language Sensitive Editor , NYSE NYSE See: New York Stock Exchange , OSE OSE - Open Systems Environment : AHM AHM Automated Hacking Machines AHM All Hands Meeting AHM Academy for Healthcare Management AHM Atom Heart Mother (Pink Floyd album) AHM Airport Handling Manual AHM Acutely Hazardous Material AHM Anti-Helicopter Mine ) - originally announced on April 22, 2003 - into a newly incorporated U.S. private company, named ONCURA. These businesses had combined sales which reached approximately $90 million in 2002. Oncura will provide minimally invasive invasive /in·va·sive/ (-siv) 1. having the quality of invasiveness. 2. involving puncture of the skin or insertion of an instrument or foreign material into the body; said of diagnostic techniques. treatment options for prostate prostate /pros·tate/ (pros´tat) a gland surrounding the bladder neck and urethra in the male; it contributes a secretion to the semen.prostat´ic pros·tate n. The prostate gland. adj. cancer using Amersham's brachytherapy technology and Galil Medical's cryotherapy Cryotherapy Definition Cryotherapy is a technique that uses an extremely cold liquid or instrument to freeze and destroy abnormal skin cells that require removal. technology. Oncura is expected to have a global presence in the treatment of prostate cancer prostate cancer, cancer originating in the prostate gland. Prostate cancer is the leading malignancy in men in the United States and is second only to lung cancer as a cause of cancer death in men. . -- On July 31, 2003, Oren Semiconductor, Inc. ("Oren"), in which Elron previously held 17%, completed an $8.0 million financing round. Zoran Corporation This article is about Zoran corporation. For other uses, see Zoran. Zoran Corporation is a multinational digital technology company, headquartered in Silicon Valley. The name Zoran is derived from the Hebrew word for silicon. (Nasdaq:ZRAN) and Oren's existing shareholders, including Elron, participated in the new round of financing. Oren is a developer of chips for the worldwide digital television market. Following the transaction, Elron holds approximately 41% of Oren. Zoran and Oren have agreed to cooperate to sell Oren's front-end solution with Zoran's back-end chips to major players in the digital television market. Liquidity and Shareholders Equity As of June 30, 2003, Elron and Elbit had cash, debentures, 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 (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. ) of approximately $96.8 million. Bank loans of wholly owned subsidiaries Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. amounted to $71.9 million, substantially all of which are guaranteed by Elron. During the first half of 2003, Elron invested approximately $18.2 million mainly in its group companies. Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. at June 30, 2003, was $271.4 million, which represents 66% of Elron's total assets. "Completing the merger of Amersham Health's brachytherapy business with Galil Medical's urology business to create Oncura, Wavion's financing round led by Sequoia Seed Capital, and Oren's private placement, including an investment by Zoran, as a strategic investor, are significant steps in building the value of these companies. Elron's significant holding in each of these promising companies will contribute to building value for Elron's shareholders in the future," said Doron Birger, Elron's 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. . "The significant reduction in our losses in the second quarter and in the first half of 2003, is an outcome of steps taken by us following the merger with Elbit and the acquisition of full control of DEP. Looking forward, I believe we will continue to report improvement in our financial results and harvest the fruits of our mature holdings." Mr. Birger concluded. Investors may access Elron's second quarter financial report and a detailed management report on the company's web site: www.elron.com Conference call details: Thursday, August 14, 2003 10:00a.m. (EST EST electroshock therapy. EST abbr. electroshock therapy ); 05:00 p.m. Israel Dial in numbers in numbered parts; as, a book published in numbers. See also: Number : In the US: (888) 269-0005 or (866)-500-4953 In the UK: 0(800)-169-8104 Other Israel & International Participants: 972-3-9255910 For your convenience, a replay of the call will be available starting one hour after the call ends until Monday, August 18, 10:00 am ET. To access the replay please dial (866) 500-4964(US), (972-3) 925-5948 (Israel) and 0-800-169-8104 (UK). Elron Electronic Industries Ltd. is a multinational high technology holding company based in Israel. Through affiliates, Elron is engaged with a group of high technology operating companies operating company A business that engages in transactions with outsiders. in the fields of advanced defense electronics, communication, software, information technology, medical devices, semiconductors and amorphous metals An amorphous metal is a metallic material with a disordered atomic-scale structure. In contrast to most metals, which are crystalline and therefore have a highly ordered arrangement of atoms, amorphous alloys are non-crystalline. . For further information, visit http://www.elron.com Any statements in this press release that may be considered 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. are subject to risks and uncertainties that could cause actual results to differ materially. Actual results may differ from such forward-looking statements due to the risk factors discussed in periodic reports filed by the Company with the Securities and Exchange Commission, which the Company urges investors to consider. Tables to follow
ELRON ELECTRONIC INDUSTRIES LTD.
AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
In thousands of U.S. Dollars
June 30, December 31,
2003 2002
(Unaudited) (Audited)
----------- ------------
ASSETS
Total current assets $89,624 $87,044
----------- ------------
Long-term assets:
Investments in affiliated companies 128,542 131,256
Investments in other companies
and long-term receivables 107,742 97,158
Long-term debentures and deposits 31,428 28,928
Deferred taxes 3,985 2,990
Severance pay deposits 2,768 2,262
----------- ------------
Total long-term assets 274,465 262,594
----------- ------------
Property and equipment, net 11,187 11,576
----------- ------------
Intangible assets 38,341 40,115
----------- ------------
Total assets $413,617 $401,329
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Total current liabilities $49,364 $55,253
----------- ------------
Long-term liabilities:
Long-term loans from banks and others 47,746 49,389
Accrued severance pay and retirement
obligations 3,437 2,921
Deferred taxes 33,499 23,650
Other 396 414
----------- ------------
Total long-term liabilities 85,078 76,374
----------- ------------
Minority interest 7,821 3,185
----------- ------------
Total shareholders' equity 271,354 266,517
---------- ------------
Total liabilities and shareholders'
equity $413,617 $401,329
========== ============
ELRON ELECTRONIC INDUSTRIES LTD.
AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
In thousands of U.S. Dollars
For the six For the three For the
months ended months ended year ended
June 30 June 30 December
------------------- ------------------ 31
2003 2002 2003 2002 2002
(Unaudited) (Unaudited) (Audited)
------------------- ------------------ ---------
Income
Net revenues $11,596 $11,649 $6,005 $5,743 $23,468
Equity in losses of
affiliated companies (5,544) (15,273) (3,249) (9,593) (21,911)
Gain from disposal and
changes in holdings in
subsidiaries and
affiliated companies,
net 1,259 2,032 888 1,892 6,888
Other income
(expenses), net 6,060 284 7,283 (204) (743)
--------- --------- -------- --------- ---------
13,371 (1,308) 10,927 (2,162) 7,702
--------- --------- -------- --------- ---------
Costs and Expenses
Cost of revenues 4,658 5,537 2,178 2,517 11,557
Research and
development
expenses, net 4,088 3,606 1,999 1,683 7,818
Marketing and selling
expenses, net 9,828 4,778 4,694 2,340 14,428
General and
administrative
expenses 6,763 4,703 3,491 2,342 11,272
Restructuring costs - 1,405 - 1,383 2,318
Amortization of
intangible assets 1,095 895 546 460 2,058
Financial expenses 1,212 214 893 446 474
--------- --------- -------- --------- ---------
27,644 21,138 13,801 11,171 49,925
--------- --------- -------- --------- ---------
Loss before tax
benefit (taxes on
income) (14,273) (22,446) (2,874) (13,333) (42,223)
Tax benefit (taxes on
income) (1,843) 1,164 (2,206) 431 2,855
--------- --------- -------- --------- ---------
Loss from continuing
operations after
tax benefit
(taxes on income) (16,116) (21,282) (5,080) (12,902) (39,368)
Minority interest in
losses of
subsidiaries 3,653 234 1,681 115 2,823
--------- --------- -------- --------- ---------
Loss from
continuing
operation (12,463) (21,048) (3,399) (12,787) (36,545)
Gain (loss) from
discontinued
operations 453 (2,368) - (2,368) (2,756)
--------- --------- -------- --------- ---------
Net loss $(12,010) $(23,416) $(3,399) $(15,155) $(39,301)
========= ========= ======== ========= =========
Basic and diluted
loss per share -
Loss from
continuing
operations $(0.43) $(0.90) $(0.12) $(0.50) $(1.39)
Gain (loss) from
discontinued
operations 0.02 (0.10) - (0.09) (0.11)
--------- --------- -------- --------- ---------
Net loss $(0.41) $(1.00) $(0.12) $(0.59) $(1.50)
========= ========= ======== ========= =========
Weighted average
number of shares
used in computing
per share amounts
(thousands) 29,183 23,382 29,185 25,552 26,272
========= ========= ======== ========= =========
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