Gilat Satellite Networks Ltd. (Nasdaq:GILTF), a worldwide leader in
satellite networking technology, solutions and services today
reported its results for the fourth quarter and full year ending
December 31, 2005. Revenues for the fourth quarter of 2005 were
$56.0 million (up from $49 million in the third quarter 2005),
EBITDA (3) was $6.6 million (up from $4.0 million in the third
quarter 2005) and net income was $1.0 million or $0.04 diluted per
share (up from a net loss of $1.7 million or $0.08 diluted per
share in the third quarter 2005). By comparison, revenues for the
fourth quarter of 2004 were $61.8 million, EBITDA was $9.7 million
and the net loss was $1.7 million or $0.08 diluted per share.
Revenues for the year ended December 31, 2005 were $209.4 million,
EBITDA was $20.5 million and net loss was $3.7 million or $0.17
diluted per share. By comparison, revenues for the year ended
December 31, 2004 were $241.5 million, EBITDA was $25.0 million and
net loss was $11.5 million or $0.52 diluted per share. These
results reflect the implementation of a Company policy to focus on
projects with higher profitability. The Company also announced that
its backlog increased to approximately $206 million as of December
31, 2005, from $192 million as of December 31, 2004. Gilat's Chief
Executive Officer and Chairman of the Board Amiram Levinberg said,
"We are pleased with our improved results in the last quarter of
2005 and with our positioning for 2006. Our backlog has increased
and this is our second consecutive quarter in which we have seen an
increased worldwide demand for our SkyEdge platform. In the fourth
quarter of 2005, we shipped approximately 40% more VSATs than in
the previous quarter." As previously announced, in December 2005,
the Company revised the terms of its loan and warrant with York
Capital Management. The increase in the value of the warrant in the
amount of $3.8 million was recorded as a discount on the loan and
an increase to equity. The discount will be amortized to financial
expenses over the term of the loan. During 2005, the Company
reduced its debt by $13.4 million (including the discount mentioned
above), from $133.2 million as of December 31, 2004 to $119.8
million as of December 31, 2005. Recently Announced Deals -- Gilat
announced that China Unicom Limited (NYSE: CHU) purchased a
1,500-site Gilat SkyEdge VSAT network. China Unicom, with 2004
revenues of more than US$9.5 billion, is one of the world's largest
telecommunications operators. The VSAT equipment will be used for
rural telecom applications throughout China. Gilat has already
deployed nearly 600 sites in the three months since this contract
was signed. -- Gilat also signed a contract to provide a SkyEdge
network to Federal State Unitary Enterprise Russian Post. Russian
Post is one of Russia's largest companies, operating more than
40,000 post offices and providing many other telecom, shipping,
retail and financial services for annual revenue of US$1.5 billion.
Gilat will deploy a SkyEdge VSAT hub station in the Siberian
capital city of Novosibirsk. The network will provide broadband
Internet access, always-on data communications for postal
applications and telephony services to remote postal facilities
throughout Siberia and far-eastern Russia. The initial order is for
several hundred sites. -- Gilat announced that it has expanded its
market leadership in Kazakhstan by signing contracts to deploy
broadband satellite networks for four of that country's leading
telecom operators -- Technoservice Lyuks, Jarykh, Astel and
Kazakhtelecom. Gilat's SkyEdge VSAT networks will bring dependable,
high-speed data networking to government agencies, banks and energy
companies. With the addition of these new networks, nearly 3,500
Gilat VSATs are deployed throughout Kazakhstan. The majority of all
telecom operators in Kazakhstan now deploy Gilat satellite
equipment. -- Gilat also announced the implementation of an
agreement with its long time customer Embratel and its satellite
subsidiary StarOne, to deploy a 2,400 site satellite-based VSAT
network for the largest cosmetics chain in Brazil, O Boticario
Comercial Farmaceutica Ltda.(O Boticario). The remote sites are
being deployed throughout O Boticario stores, including various
locations in airports, supermarkets and shopping centers throughout
Brazil. One thousand sites have already been implemented, with the
remaining to be installed in the first half of 2006. -- Spacenet
Inc. was chosen by Scientific Games to provide 3,000 Skystar
Advantage VSAT terminals for state lottery networks in Colorado,
Pennsylvania, North Dakota and South Dakota. Spacenet also provided
SGI with a dedicated hub, which will be used to support the
expansion of its VSAT network. About Gilat Satellite Networks Ltd.
Gilat Satellite Networks Ltd. (Nasdaq:GILTF) is a leading provider
of products and services for satellite-based communications
networks. The Company operates under three business units: (i)
Gilat Network Systems ("GNS"), which is a provider of network
systems and associated professional services to service providers
and operators; (ii) Spacenet Inc, in North America, which provides
managed services for businesses and governments through its
Connexstar service brand and for consumers through its StarBand
service brand; (iii) Spacenet Rural Communications, which offers
rural telephony and internet access solutions to remote areas
primarily in Latin America. Gilat was founded in 1987 and has
shipped over 600,000 Very Small Aperture Terminals (VSATs) to more
than 85 countries across six continents. Gilat's headquarters is
located in Petah Tikva, Israel. The Company has 14 local offices
and 3 service facilities worldwide. Gilat markets the SkyEdge(TM)
Product Family which includes the SkyEdge(TM) Pro, SkyEdge(TM) IP,
SkyEdge(TM) Call, SkyEdge(TM) DVB-RCS and SkyEdge(TM) Gateway. In
addition, the Company markets numerous other legacy products. Visit
Gilat at www.gilat.com Notes: 1) Certain statements made herein
that are not historical are forward-looking within the meaning of
the Private Securities Litigation Reform Act of 1995. The words
"estimate", "project", "intend", "expect", "believe" and similar
expressions are intended to identify forward-looking statements.
These forward-looking statements involve known and unknown risks
and uncertainties. Many factors could cause the actual results,
performance or achievements of Gilat to be materially different
from any future results, performance or achievements that may be
expressed or implied by such forward-looking statements, including,
among others, changes in general economic and business conditions,
inability to maintain market acceptance to Gilat's products,
inability to timely develop and introduce new technologies,
products and applications, rapid changes in the market for Gilat's
products, loss of market share and pressure on prices resulting
from competition, introduction of competing products by other
companies, inability to manage growth and expansion, loss of key
OEM partners, inability to attract and retain qualified personnel,
inability to protect the Company's proprietary technology and risks
associated with Gilat's international operations and its location
in Israel. For additional information regarding these and other
risks and uncertainties associated with Gilat's business, reference
is made to Gilat's reports filed from time to time with the
Securities and Exchange Commission. 2) The attached summary
financial statements were prepared in accordance with U.S. GAAP.
The attached summary financial statements for the year ended
December 31 2005 and Q4 2005 are unaudited. 3) Operating income
(loss) before depreciation, amortization and exceptional items,
('EBITDA') is presented because it is a measure commonly used and
is presented solely in order to improve the understanding of the
Company's operating results and to provide further perspective on
these results. EBITDA, however, should not be considered as an
alternative to operating income (loss) or net income (loss) for the
period as an indicator of the operating performance of the Company.
Similarly, EBITDA should not be considered as an alternative to
cash flows from operating activities as a measure of liquidity.
EBITDA is not a measure of financial performance under generally
accepted accounting principles and may not be comparable to other
similarly titled measures for other companies. EBITDA may not be
indicative of the historic operating results of the Company; nor is
it meant to be predictive of potential future results.
Reconciliation between the Company's Operating income (loss) and
EBIDTA is presented in the attached summary financial statements.
-0- *T GILAT SATELLITE NETWORKS LTD. CONDENSED CONSOLIDATED BALANCE
SHEET US dollars in thousands December 31, December 31,
------------ ------------ 2005 2004 ------------ ------------
Unaudited Unaudited ------------ ------------ ASSETS CURRENT
ASSETS: Cash and cash equivalents 74,929 75,771 Short-term bank
deposits 3,301 - Short-term restricted cash 15,844 14,168
Restricted cash held by trustees 6,638 10,620 Trade receivables
(net of allowance for doubtful accounts) 33,683 31,380 Inventories
23,253 23,277 Other current assets 27,215 27,059 ------------
------------ Total current assets 184,863 182,275
-------------------- ------------ ------------ LONG-TERM
INVESTMENTS AND RECEIVABLES: Long-term restricted cash 6,699 7,534
Long-term restricted cash held by trustees 13,692 18,994 Severance
pay fund 8,467 7,933 Long-term trade receivables, receivables in
respect of capital leases and other receivables, net 22,757 27,728
------------ ------------ 51,615 62,189 ------------ ------------
PROPERTY AND EQUIPMENT, NET 124,245 137,198 ------------
------------ INTANGIBLE ASSETS AND DEFERRED CHARGES, NET 12,254
9,432 ------------ ------------ TOTAL ASSETS 372,977 391,094
------------ ============ ============ *T -0- *T GILAT SATELLITE
NETWORKS LTD. CONDENSED CONSOLIDATED BALANCE SHEET US dollars in
thousands December 31, December 31, ------------ ------------ 2005
2004 ------------ ------------ Unaudited Unaudited ------------
------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT
LIABILITIES: Short-term bank credit 8,172 4,159 Current maturities
of long-term loans 7,712 8,869 Trade payables 24,180 21,245 Accrued
expenses 22,418 26,228 Short-term advances from customer held by
trustees 15,502 13,500 Other accounts payable 36,672 40,048
------------ ------------ Total current liabilities 114,656 114,049
-------------------------- ------------ ------------ LONG-TERM
LIABILITIES: Accrued severance pay 8,396 8,172 Long-term advances
from customer held by trustees 27,835 40,226 Long-term loans, net
of current maturities 95,745 108,182 Accrued interest related to
restructured debt 3,850 4,820 Other long-term liabilities 20,657
15,951 Excess of losses over investment in affiliates 7 2,102
Convertible subordinated notes 16,333 16,171 ------------
------------ Total long-term liabilities 172,823 195,624
--------------------------- ------------ ------------ COMMITMENTS
AND CONTINGENCIES SHAREHOLDERS' EQUITY: Share capital - Ordinary
shares of NIS 0.2 par value 995 984 Additional paid in capital
738,724 733,582 Accumulated other comprehensive loss 16 (2,624)
Accumulated deficit (654,237) (650,521) ------------ ------------
Total shareholders' equity 85,498 81,421 --------------------------
------------ ------------ Total liabilities and shareholders'
equity 372,977 391,094 ------------------------------------------
============ ============ *T -0- *T GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in
thousands (except per share data) Year ended Three months ended
December 31, December 31, ------------------- -------------------
2005 2004 2005 2004 --------- --------- --------- ---------
Unaudited Unaudited Unaudited Unaudited --------- ---------
--------- --------- Revenues 209,395 241,498 55,958 61,801 Cost of
Revenues 133,219 164,395 34,665 38,071 --------- ---------
--------- --------- Gross profit 76,176 77,103 21,293 23,730
--------- --------- --------- --------- Research and development
expenses: Expenses incurred 16,944 19,134 3,905 5,086 Less - grants
2,950 5,255 364 810 --------- --------- --------- --------- 13,994
13,879 3,541 4,276 --------- --------- --------- --------- Selling,
general and administrative expenses 60,794 69,891 15,601 17,876
Impairment of tangible and intangible assets - 2,161 - - Gain from
derecognition of Liability - (245) - - --------- ---------
--------- --------- Operating income (loss) 1,388 (8,583) 2,151
1,578 --------- --------- --------- --------- Financial expenses
(2,677) (266) (821) (1,755) Other income (expenses) 299 (274) 159
(82) --------- --------- --------- --------- Income (loss) before
taxes on income (990) (9,123) 1,489 (259) --------- ---------
--------- --------- Taxes on income 3,126 4,429 473 1,733 ---------
--------- --------- --------- Income (loss) after taxes on income
(4,116) (13,552) 1,016 (1,992) --------- --------- ---------
--------- Equity in profits of affiliated companies 400 1,242 - 305
Minority interest in losses of a subsidiary - 164 - - ---------
--------- --------- --------- Net income (loss) from continuing
operations (3,716) (12,146) 1,016 (1,687) --------- ---------
--------- --------- Gain from cumulative effect of a change in an
accounting principle - 611 - - --------- --------- ---------
--------- Net income (loss) (3,716) (11,535) 1,016 (1,687)
========= ========= ========= ========= Basic net earnings (loss)
per share (0.17) (0.52) 0.05 (0.08) ========= ========= =========
========= Diluted net earnings (loss) per share (0.17) (0.52) 0.04
(0.08) ========= ========= ========= ========= Shares used in basic
net earnings (loss) per share computation 22,440 22,242 22,555
22,286 ========= ========= ========= ========= Shares used in
diluted net earnings (loss) per share computation 22,440 22,242
22,778 22,286 ========= ========= ========= ========= *T -0- *T
GILAT SATELLITE NETWORKS LTD. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS US dollars in thousands Year ended Three months ended
December 31, December 31, -------- -------- -------- --------- 2005
2004 2005 2004 -------- -------- -------- --------- Unaudited
Unaudited Unaudited Unaudited --------- --------- ---------
--------- Cash flows from operating activities:
------------------------- Net income (loss) (3,716) (11,535) 1,016
(1,687) Adjustments required to reconcile net income (loss) to net
cash provided by operating activities: Depreciation and
amortization 19,116 31,674 4,464 8,137 Non cash cumulative effect
relating to a subsidiary - (198) - - Loss from Disposal of a
subsidiary 171 - - - Loss (gain) from disposal of a subsidiary
(397) 192 (200) - Deferred Stock compensation relating to options
137 207 (201) 30 Deferred Stock compensation relating to options in
a subsidiary - (764) - - Impairment of property and equipment and
other intangible assets - 2,161 - - Equity in profits of affiliated
companies (400) (1,242) - (305) Accrued severance pay, net (309)
431 (99) (87) Interest accrued on short and long-term restricted
cash (490) (1,943) (106) (494) Exchange differences on long- term
loans (973) 449 (127) 592 Exchange differences on loans to
employees 213 - (11) - Minority interest in losses of a subsidiary
- (164) - - Capital loss from disposal of property and equipment
315 - 15 - Deferred income taxes, net (473) 1,869 (224) 575
Decrease (increase) in trade receivables (2,440) 7,970 (2,424)
8,539 Decrease in Receivables in respect of capital leases, prepaid
expenses and other accounts receivable (including long- term) 6,711
12,449 2,519 5,683 Increase in inventories (5,188) (6,848) (5,602)
(5,197) Increase (decrease) in trade payables 2,941 (5,330) 5,099
2,845 Increase (decrease) in accrued expenses (4,652) (11,637)
1,794 613 Increase (decrease) in other accounts payable (including
long-term) 3,509 (1,427) 6,589 (3,712) Increase (decrease) in
advances from customers held in trustees, net (including long-term)
(10,388) 14,207 (2,556) (3,152) -------- -------- --------
--------- Net cash provided by operating activities 3,687 30,521
9,946 12,380 -------- -------- -------- --------- *T -0- *T GILAT
SATELLITE NETWORKS LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS US dollars in thousands Year ended Three months ended
December 31, December 31, -------- -------- -------- --------- 2005
2004 2005 2004 -------- -------- -------- --------- Unaudited
Unaudited Unaudited Unaudited --------- --------- ---------
--------- Cash flows from investing activities:
------------------------- Purchase of property and equipment
(3,605) (6,163) (679) (1,678) Return of investment 388 - - -
Purchase of minority shares - (1,053) - - Disposal of subsidiary
(181) 600 - - Consolidation of StarBand - 2,592 - - Investment in
short-term bank deposits (3,301) (442) (3,301) - Proceeds from
short-term bank deposits - 442 - - Proceeds from disposal of fixed
assets 34 - 26 - Loans to employees - Net (3,606) - 75 - Investment
in restricted cash held by trustee (3,305) (23,501) (1,060) -
Proceeds from restricted cash held by trustee 13,078 22,486 5,157
3,692 Investment in restricted cash (including long-term) (13,759)
(11,187) (1,120) (1,985) Investment in other assets (40) (78) 53
(33) Proceeds from restricted cash (including long-term) 13,007
9,840 5,583 1,644 -------- -------- -------- --------- Net cash
provided by (used in) investing activities (1,290) (6,464) 4,734
1,640 -------- -------- -------- --------- Cash flows from
financing activities: ------------------------- Exercise of
options, net 1,218 432 8 414 Short-term bank credit, net 4,013
2,389 (3,264) 1,251 Repayment of long-term loans (8,823) (2,924)
(1,007) (610) -------- -------- -------- --------- Net cash
provided by (used in) financing activities (3,592) (103) (4,263)
1,055 -------- -------- -------- --------- Effect of exchange rate
changes on cash and cash equivalents 353 36 (166) 29 --------
-------- -------- --------- Increase (decrease) in cash and cash
equivalents (842) 23,990 10,251 15,104 Cash and cash equivalents at
the beginning of the year 75,771 51,781 64,678 60,667 --------
-------- -------- --------- Cash and cash equivalents at the end of
the year 74,929 75,771 74,929 75,771 ======== ======== ========
========= *T -0- *T GILAT SATELLITE NETWORKS LTD. CONDENSED EBITDA
US dollars in thousands Year ended Three months ended December 31,
December 31, ------------------- ------------------- 2005 2004 2005
2004 --------- --------- --------- --------- Unaudited Unaudited
Unaudited Unaudited --------- --------- --------- ---------
Operating income (loss) 1,388 (8,583) 2,151 1,578 Less: Impairment
of tangible and intangible assets - 2,161 - - Gain from
derecognition of liability - (245) - - Deprecation and amortization
19,116 31,674 4,464 8,137 --------- --------- --------- ---------
EBITDA 20,504 25,007 6,615 9,715 ========= ========= =========
========= *T -0- *T GILAT SATELLITE NETWORKS LTD. DISCLOSURE OF
NON-US GAAP NET EARNINGS (LOSS) FOR COMPARATIVE PURPOSES AND
EARNINGS (LOSS) PER SHARE EXCLUDING STOCK COMPENSATION RELATED TO
OPTIONS U.S. dollars in thousands Year ended Three months ended
December 31, December 31, ------------------- -------------------
2005 2004 2005 2004 --------- --------- --------- ---------
Unaudited Unaudited Unaudited Unaudited --------- ---------
--------- --------- US GAAP net earnings (loss) (3,716) (11,535)
1,016 (1,687) --------- --------- --------- --------- Stock
compensation relating to options 137 (557) (201) 30 ---------
--------- --------- --------- Non-US GAAP net earnings (loss)
(3,579) (12,092) 815 (1,657) ========= ========= =========
========= Basic non US GAAP net earnings (loss) per share (0.16)
(0.54) 0.04 (0.07) ========= ========= ========= ========= Diluted
non US GAAP net earnings (loss) per share (0.16) (0.54) 0.04 (0.07)
========= ========= ========= ========= *T
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