Gilat Announces Record Results for 1998.PETAH TIKVA, Israel--(BUSINESS WIRE)--March 11, 1999--Gilat Satellite Networks 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 : GILTF) reported revenues for the year ended December 31, 1998 of US$155.3 million, an increase of 50 percent over 1997 sales of US$103.7 million. Due to one-time charges of US$106.4 million related to the December 31, 1998 acquisition of GE Capital Spacenet Services, Inc. (Spacenet), Gilat reported a loss of US$81.6 million, or US$7.38 per share. Excluding these charges net income would have been US$24.8 million, or US$2.14 per share, an increase of 42 percent over the US$16.9 million (US$1.51 per share) reported for 1997. Revenues for the fourth quarter ended December 31, 1998 were US$49.7 million, an increase of 66 percent over the US$30 million result for the same period in 1997. Fourth quarter earnings reflect the one-time charges incurred for the Spacenet acquisition, resulting in a loss of US$97.3 million, or US$8.74 per share. Excluding these charges, earnings were US$9.1 million (US$.76 per share), an increase of 49 percent over the US$5.7 million figure (US$0.51 per share) for the final quarter of 1997. The acquisition of Spacenet was completed using purchase accounting rules, consequently all earnings of Spacenet prior to the merger with Gilat have been excluded. As of December 31, 1998 the backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. and future contracted revenue stream stood at approximately US$175 million. The backlog calculation does not include any orders from the previously announced MCI (1) (Media Control Interface) A high-level programming interface from Microsoft and IBM for controlling multimedia devices. It provides commands and functions to open, play and close the device. (2) (Microwave Communications Inc. Worldcom/USPS contract, a 10-year Indefinite INDEFINITE. That which is undefined; uncertain. INDEFINITE, NUMBER. A number which may be increased or diminished at pleasure. 2. When a corporation is composed of an indefinite number of persons, any number of them consisting of a majority of those Delivery/Indefinite Quantity contract which could total as many as 26,000 sites. Good will depreciation may be adjusted as a result of finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. of the adjusted balance sheet pursuant to the Spacenet merger agreement and line items may shift or be adjusted based on the final audit of the consolidated subsidiaries. Gilat Chairman 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. Yoel Gat remarked, "In 1998 Gilat continued to achieve outstanding growth and enhance its reputation as a leader in VSAT (Very Small Aperture satellite Terminal) A small earth station for satellite transmission that handles up to 56 Kbits/sec of digital transmission. VSATs that handle the T1 data rate (up to 1.544 Mbits/sec) are called "TSATs. technology. Our successful merger with Spacenet represents one of the most significant milestones in our history to date." New milestones in interactive data segment During 1998 Gilat shipped approximately 34,000 interactive VSATs, as compared to approximately 20,000 in 1997. 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. Comsys, a well recognized industry research and analysis group, Gilat's share of 1998 interactive data VSAT orders for which contracts were awarded increased to 40 percent, with an additional 3 percent share attributable to the Clearlink product line acquired through Spacenet. This compares favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. to the 30 percent cumulative market share captured by the Company through 1997. Separately, Gilat announced today that GTECH Corp. (GTECH) ordered 5,000 GSAT GSAT GTE (General Telephone and Electronics) Satellite Corporation GSAT Geostationary Satellite GSAT General Scholastic Aptitude Test GSAT Global Satellite Data Acquisition Team GSAT Ground System Acceptance Test GSAT Graduate School Admissions Test (TM) terminals for its domestic and international lottery lottery, scheme for distributing prizes by lot or other method of chance selection to persons who have paid for the opportunity to win. The term is not applicable when lots are drawn without payment by the interested parties to determine some matter, e.g. networks, with delivery scheduled for 1999 and 2000. GTECH Vice President of Technology Don Stanford commented, "We have relied on Gilat VSATs for years. By enabling us to offer not only lottery, but also point-of-sale and other data applications, Gilat's latest technology should position us well into the next century." In addition, Gilat also announced the signing of expansion contracts in two key market segments. Novanet, a US-based provider of network services to the oil pipeline industry, has placed an order for a hub and 600 Skystar Advantage(TM) VSATs. The company also announced the signing of a 700-site network expansion for Mobilecomm for use in a two-way paging application. Rural telephony Meaning "sound over distance," it refers to electronically transmitting the human voice. In the beginning, telephony dealt only with analog signals in the circuit-switched networks of the telephone companies. growth exceeds 300 percent Rural telephony revenues increased from 1997 by over 300 percent due principally to the delivery of Gilat DialAway(TM) and FaraWay far·a·way adj. 1. Very distant; remote. 2. Abstracted; dreamy: a faraway look. faraway Adjective 1. very distant 2. (TM) products under three major contracts in South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. , Ethiopia (largely in support of Universal Service Obligations for remote villages) and in Kazakhstan. The previously cited Comsys report stated that for the period 1997-1998, Gilat's DialAway product has attained at·tain v. at·tained, at·tain·ing, at·tains v.tr. 1. To gain as an objective; achieve: attain a diploma by hard work. 2. a 57 percent market share of the contracts awarded in the thin-route telephony networks segment. Spacenet integration continues The integration of the newly acquired Spacenet unit is well underway, with a new executive management team in place at the McLean, Virginia McLean is an unincorporated community located in Fairfax County in Northern Virginia. A small geographic area along Chain Bridge Road in Arlington County has a 22101 zip code and is also part of McLean. headquarters. Significant 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). in the service delivery functions has been completed, and product rationalization rationalization, in psychology: see defense mechanism. and customer migration to the Skystar Advantage unified hardware platform has entered the implementation phase. In addition, MCI Worldcom has informed Spacenet of its intent to issue the first major order under the previously announced MCI Worldcom/USPS VSAT contract, which is expected to call for the installation of 7,000 VSATs at major postal facilities by September 1999. These VSATs will provide backup and disaster recovery services for the existing frame relay A high-speed packet switching protocol used in wide area networks (WANs). Providing a granular service of up to DS3 speed (45 Mbps), it has become popular for LAN to LAN connections across remote distances, and services are offered by most major carriers. terrestrial Dealing with the earth. See terrestrial link. lines, with Spacenet responsible for operations and maintenance. There can be no assurance that the intended order will be placed or in the amount expected. Gilat also announced the award to Spacenet of several new US Skystar Advantage contracts, for Schwan's (600 sites), AT&T Fastar (369 sites), and Rose's Stores (103 sites). Chairman Gat stated, "1999 will be a historic year for Gilat as we provide a complete solution of hardware and services for the first time to the US and European marketplace through our Spacenet subsidiary. Combined with the strong growth in our traditional rural telephony and paging markets, we are excited about our prospects for 1999." Gilat's teleconference to the financial community, scheduled today at 10:30 AM EST EST electroshock therapy. EST abbr. electroshock therapy 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. , will also be broadcast live over the Internet. The event can be accessed at http://www.gilat.com where there will also be a link for downloading downloading - download the necessary software (Real Player 5). Gilat Satellite Networks Gilat Satellite Networks is a publicly-traded Israeli company (NASDAQ: GILT. TASE) Gilat designs, develops and markets satellite and hybrid networking products, services and solutions to operators in 85 countries. Ltd. designs, develops, manufactures, markets and supports Very Small Aperture Terminal (communications) Very Small Aperture Terminal - (VSAT) A kind of ground station used to contact a communications satellite such as INMARSAT. (VSAT) satellite earth stations and related hub equipment and software. Gilat products are incorporated into telecommunications networks A telecommunications network is a of telecommunications links and nodes arranged so that messages may be passed from one part of the network to another over multiple links and through various nodes. that provide satellite-based communications between a central location and a large number of geographically dispersed sites A site selected to reduce concentration and vulnerability by its separation from other military targets or a recognized threat area. . The Company offers a range of products focused on specific markets: DATA: Skystar Advantage(TM), enables interactive, transaction-oriented applications. ISAT ISAT Illinois Standards Achievement Test ISAT International Subarachnoid Aneurysm Trial ISAT Information Science and Technology ISAT Information and Advisory Service on Appropriate Technology ISAT Illinois State Assessment Test (R) facilitates frame-relay delivery of voice and data. OneWay(TM) VSAT broadcasts paging signals, news and financial data. TELEPHONY: FaraWay(TM) VSAT offers multi-channel, toll-quality telephone, fax and data services. DialAway(R) VSAT allows for one- to three-channel, telephone, fax and data services to rural communities. IP (INTERNET): SkySurfer(TM) VSAT delivers interactive corporate communications Corporate communications is the process of facilitating information and knowledge exchanges with internal and key external groups and individuals that have a direct relationship with an enterprise. using a client's existing terrestrial or VSAT return path; SkyBlaster(TM) VSAT, which utilizes DVB (Digital Video Broadcasting) An international digital television (DTV) standard that is the European and Far Eastern counterpart of the North American ATSC standard. technology, does the same but provides a satellite return path. With the acquisition of Spacenet from GE Americom, a subsidiary of General Electric, on December 31, 1998, Gilat provides service offerings which include access to satellite transponder A receiver/transmitter on a communications satellite. It receives a microwave signal from earth (uplink), amplifies it and retransmits it back to earth at a different frequency (downlink). A satellite has several transponders. capacity, installation of network equipment, on-line network monitoring The term network monitoring describes the use of a system that constantly monitors a computer network for slow or failing systems and that notifies the network administrator in case of outages via email, pager or other alarms. and network maintenance and repair services. As of May 1998, Gilat holds a minority share in Global Village Telecom (GVT GVT Global Virtual Time GVT German Volume Training (high-volume light-weight strength training system) GVT Ground Vibration Test GVT Government Income Trust (stock symbol) GVT Global Virtual Team ), which specializes in the operation of satellite-based rural telephony networks, and in KSAT KSAT Knowledge, Skills, Abilities, and Tools KSAT Killer Satellite (video games\) , a joint venture with Singapore-based Keppel Communications, which is dedicated to providing satellite-based telecommunication telecommunication Communication between parties at a distance from one another. Modern telecommunication systems—capable of transmitting telephone, fax, data, radio, or television signals—can transmit large volumes of information over long distances. services in China. In December 1996, Gilat acquired Skydata Inc. (now Gilat Florida Inc.), a VSAT company specializing in the paging and data broadcast markets. Skystar Advantage(TM), ISAT(R), FaraWay(TM), DialAway(R), SkySurfer(TM), SkyBlaster(TM) and OneWay(TM) are trademarks or registered trademarks of Gilat Satellite Networks Ltd. or its subsidiaries. GSAT(TM) is a trademark of GTECH Corp. Certain statements made herein that are not historical are forward-looking 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" 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 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 OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and 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. 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. -0-
Gilat Satellite Networks Ltd.
An Israeli Corporation
Condensed Consolidated Balance Sheets
US Dollars in Thousands December 31
--------------------------------
1998 1997
-------------- --------------
Audited Audited
-------------- --------------
Assets
Current Assets:
Cash and cash equivalents 7,564 15,704
Short-term bank deposit 10,395
Short-term loan to an
associated company 1,000
Accounts receivable:
Trade 72,103 45,640
Israeli government
departments & agencies 3,725 6,792
Other 10,163 3,361
Prepaid expenses 2,890 1,703
Inventories 78,031 29,245
-------------- --------------
Total current assets 175,476 112,840
-------------- --------------
Investments and non-current
receivables:
Long-term bank deposit 40,701 40,000
Investments in companies
and non-current receivables 17,901 5,983
Deferred income taxes 364 520
-------------- --------------
58,966 46,503
-------------- --------------
Property, plant and equipment:
Cost 118,599 55,839
Less - accumulated
depreciation & amortization 23,385 7,073
-------------- --------------
95,214 48,766
-------------- --------------
Deferred charges,
net of accumulated amortization 80,230 3,851
============== ==============
409,886 211,960
============== ==============
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term bank credit 23,158 2,719
Accounts payable and accruals:
Trade 25,102 11,367
Other 62,161 10,996
Advances from customers 1,364 2,677
-------------- --------------
Total current liabilities 111,785 27,759
Convertible Subordinated Notes 75,000 75,000
Accrued Severence Pay 2,218 863
Other Long-term liabilities 513
-------------- --------------
Total liabilities 189,516 103,622
-------------- --------------
Shareholders' Equity:
Share capital 52 39
Share premium 266,915 73,263
Retained earnings (46,597) 35,036
-------------- --------------
220,370 108,338
============== ==============
409,886 211,960
============== ==============
Gilat Satellite Networks Ltd.
An Israeli Corporation
Condensed Consolidated Income Statements
US Dollars in Thousands
-----------------------
Year ended Three months ended
December 31 December 31
-------------------------------------------
1998 1997 1998 1997
--------- ---------- --------- --------
Audited Audited Unaudited Unaudited
--------- ---------- --------- --------
Sales 155,335 103,690 49,659 30,002
-----
--------- ---------- --------- --------
Cost of Sales:
In respect of
products 86,603 58,742 27,540 16,358
Write-off of
inventories
associated
with
restructuring 9,495 9,495
------------ ---------- --------- --------
96,098 58,742 37,035 16,358
------------ ---------- --------- --------
Gross Profit 59,237 44,948 12,624 13,644
------------ ---------- --------- --------
Research and
Development Costs:
Expenses Incurred 15,815 10,615 4,654 3,230
Less - Grants 3,035 2,494 292 738
------------ ---------- --------- --------
12,780 8,121 4,362 2,492
Acquired research
and development 80,000 80,000
------------ ---------- --------- --------
Net R&D 92,780 8,121 84,362 2,492
------------ ---------- --------- --------
Selling, General
and Administrative
Expenses 29,077 20,321 7,926 5,292
------------ ---------- --------- --------
(62,620) 16,506 (79,664) 5,860
------------ ---------- --------- --------
Restructuring
Expenses 14,239 14,239 0
------------ ---------- --------- --------
Operating Income (76,859) 16,506 (93,903) 5,860
Financial Income
(Expenses) - net (1,247) 538 14 (26)
Write-off of
investments
associated with
restructuring (2,700) (2,700)
Other Income
(Expenses) - net 162 30 (135) (15)
------------ ---------- --------- --------
Income (Loss)
Before Taxes
on Income (80,644) 17,074 (96,724) 5,819
Taxes on Income 286 130 95
------------ ---------- --------- --------
Income (Loss)
from Operations
of the Company
and its Subsidiaries (80,930) 16,944 (96,724) 5,724
Share in Losses
of Associated
Companies 703 555
============ ========== ========= ========
Net Income (Loss) (81,633) 16,944 (97,279) 5,724
============ ========== ========= ========
Earnings (Loss)
per Share
(in US Dollars)
Basic ($7.38) $1.56 ($8.74) $0.52
============ ========== ========= ========
Fully Diluted ($7.38) $1.51 ($8.74) $0.51
============ ========== ========= ========
Weighted Average
Number of Shares
Used in Computation
of Earnings (Loss)
Per Share
(in Thousands)
Basic 11,059 10,895 11,136 10,977
============ ========== ========= ========
Fully Diluted 11,059 11,255 11,136 11,312
============ ========== ========= ========
-- Earnings per share before expenses associated with the
restructuring:
Year ended December 31, 1998 Basic $2.24
============
Fully Diluted $2.14
============
Three months ended December 31, 1998 Basic $0.80
============
Fully Diluted $0.76
============
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