Business Editors
PETACH TIKVA, Israel--(BUSINESS WIRE)--Aug. 15, 2000
Gilat Communications Ltd. (NASDAQ; GICOF) reported financial results for the second quarter ended June 30, 2000, which showed substantial revenue growth of 111 percent to $ 19.0 million in the second quarter, from $9.0 million in the same quarter of 1999.
Total revenues increased to $33.5 million in the six months ended June 30, 2000 from $15.5 million in the same period of 1999.
Net loss for the second quarter was $3.7 million (-$0.31 per share), compared to a net income of $1.3 million ($0.12 per share) in the same period in 1999. Goodwill amortization included in the second quarter's financial results was $ 830,000 compared with $ 86,000 in the same period in 1999, mainly due to the recent acquisition of the company's subsidiaries and associated companies.
After one-time charges and goodwill amortization, net loss for the six months ended June 30, 2000 was $11.8 million (-$0.95 per share), or $6.1 million (-$0.49 per share), when disregarding the one-time charges of $5.7 million, compared with a net income of $1.8 million ($0.17 per share) in the same period in 1999. Goodwill amortization included in the financial results was $ 1.4 million compared with $173,000 in the same period in 1999, mainly due to the recent acquisition of the company's subsidiaries and associated companies.
This is the first full quarter of the combined operations of Gilat's acquisitions in the US. During this quarter, sales and marketing efforts, which were required to combine the three US operations into Mentergy Inc. and transform it into a leading e-learning full solution provider, were increased. As a result, selling, marketing, general and administrative expenses increased 239 percent to $7.8 million in the second quarter of 2000 from $2.3 million in the same quarter of 1999. The revenue results from these efforts are expected to be reflected in future financial results this year.
Commenting on the quarter, Gilat CEO and Chairman, Mr. Shlomo Tirosh said, " This quarter was significant not only for our record results, but also because it marks Mentergy's first quarter of combined activity in the United States. Along with the significant increase in revenues, we are continuing our investment in the integration of our recent acquisitions. This trend is expected to continue throughout the third and fourth quarters of the 2000 financial year. We expect that, in addition to the revenue growth already demonstrated, these investments will enable the company to return to its historical profit levels in year 2001."
Noam Fink, Mentergy CEO said: "Mentergy is uniquely positioned in the U.S. market to offer end-to-end e-learning solutions utilizing its products, services and expertise. We are encouraged by the growing demand from the market for such offerings, and we will continue to strengthen our position and increase our market share by forming strategic alliances, and through the continuing development of new services and products."
The second quarter also saw the expansion of the Company's activities in international markets, such as the launching of the UK-based University of Derby's e-learning initiative, using our TrainNet Interactive Distance Learning platform, to bring thousands of hours of live lessons from five studios located in England to 24 remote classrooms in Israel, as well as John Bryce Training's expansion of its activities to Europe, first in Hungary and later to England through the recently announced acquisition of Aris UK. The acquisition is in line with John Bryce's plans to expand the provision of blended e-learning solutions in the international markets.
About Gilat Communications:
Gilat Communications, Ltd. is a leading developer and provider of end-to-end interactive distance learning (IDL) solutions worldwide. TrainNet(TM), Gilat's comprehensive broadband IDL solutions allows corporations, banks, government agencies and academic institutions to create and conduct live as well as offline instructor-led or self-paced sessions utilizing personal computers, regular telephone sets, internet connections and any broadband communication channel. Gilat Communications has formed Mentergy its U.S. e-learning operation out of the merger of Allen Communication, which has been providing advanced courseware development services and technology-based authoring and design tools for almost 20 years to customers ,includes more than 60% of the Fortune 500, and the LearnLinc Corporation, the world pioneer in live, collaborate Web-based training. LearnLinc's interactive e-learning systems are used by hundreds of corporations and organizations around the world. John Bryce Training is Gilat's IT training and content company, and is the largest provider of IT training services in Israel and is authorized by, among other vendors, Microsoft, Novell, CA, Sun and Oracle. www.gilat.net
About Mentergy
Mentergy, Inc. is a Gilat Communications, Ltd. e-learning company formed by Gilat's acquisition of LearnLinc Corporation and Allen Communication. Mentergy addresses the growing industry demand for a company to help organizations make a cost-effective shift from traditional learning with its inherent expense and loss of productivity, to a blended approach, which includes technology-based training solutions or e-learning. Mentergy's customers range from midsize companies to Global 2000, including Aetna US Healthcare, MCI WorldCom, Made2Manage, Citibank, Countrywide, Rockwell-Collins, Federal Reserve Bank of Philadelphia, Intel and other industry leaders.
About John Bryce Training
As the leading IT education group in Israel, John Bryce Training's high quality and standards have led to its accreditation by many of the world's leading international software, communication and hardware vendors such as: Microsoft, Oracle, Computer Associates, Compaq, Cisco, Novell, Checkpoint, Nortel as their Certified Training Center in Israel. The company offers a wide variety of IT Education services from regular technical training courses for IT professionals, as well as special "Be-IT-Pro" program courses (special re-training programs that re-train people from all other professions into IT professionals) and ERP / CRM & IS solutions implementation and training for end users.
Courseware and courses delivered by John Bryce Training are delivered via traditional frontal classes and blended e-learning technologies over the web. John Bryce Training is one of the first companies in the world to implement e learning through a unique "blended e-learning" model.
Gilat Communications teleconference call is scheduled to take place at 10:30am EST today. To participate please call 1-800-289-0437 in the U.S., or 1-913-981-5508 outside the U.S.
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 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 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 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.
GILAT COMMUNICATIONS LTD. (An Israeli Corporation) CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 2000 June 30 December 31, 2000 1999(1) 1999(1) ----- ----- ----- (Unaudited) (Audited) U.S. $ in thousands --------------------------------- Assets CURRENT ASSETS: Cash and cash equivalents 33,601 5,909 5,508 Short-term investments 1,662 2,025 4,158 Accounts receivable: Trade: Related parties 3,124 3,817 4,778 Other 19,428 13,221 14,952 Other 1,691 3,134 2,277 Prepaid expenses 1,547 2,028 Inventories 5,533 3,458 5,942 ------ ------ ------ Total current assets 66,586 31,564 39,643 ------ ------ ------ INVESTMENTS AND LONG-TERM RECEIVABLES: Investment in associated companies 318 134 237 Investment in other companies 1,418 Other 4,332 1,611 ------ ------ ------ 6,068 134 1,848 ------ ------ ------ PROPERTY, PLANT AND EQUIPMENT: Cost 34,581 20,449 29,819 Less - accumulated depreciation and amortization 9,310 4,286 7,745 ------ ------ ------ 25,271 16,163 22,074 ------ ------ ------ GOODWILL AND OTHER INTANGIBLE ASSETS, net of accumulated intangible amortization 45,430 4,953 26,613 ------- ------ ------ 143,355 52,814 90,178 ======= ====== ====== June 30 December 31, 2000 1999 1999 ---- ---- ---- (Unaudited) (Audited) U.S. $ in thousands ------------------------------- Liabilities and shareholders' equity CURRENT LIABILITIES: Short-term bank credit 45,140 2,502 5,537 Current maturities of long-term debt 2,362 1,554 2,784 Note payable 250 Accounts payable and accruals: Trade: Related parties 739 2,297 3,218 Other 6,770 2,909 6,029 Other 7,745 4,295 7,470 Deferred revenues 5,168 268 3,119 ------ ------ ------ Total current liabilities 67,924 13,825 28,407 LONG-TERM DEBT LIABILITIES: Convertible subordinated notes 25,000 Long-term debt, net of current maturities 10,003 4,488 9,779 Accrued severance pay, net of amounts funded 1,069 410 822 Deferred income taxes 136 120 209 Customer advances 387 387 Excess of losses of an associated company over investment therein 33 32 ------ ------ ------ Total long-term liabilities 36,628 5,018 11,229 ------ ------ ------ Total liabilities 104,552 18,843 39,636 SHAREHOLDERS' EQUITY: Share capital 31 28 28 Receipts on accounts of shares 19,914 Capital surplus 46,117 25,686 26,134 Accumulated other comprehensive income - currency translation adjustments 14 39 39 Retained earnings (accumulated deficit) (7,359) 8,218 4,427 ------- ------ ------ Total shareholders' equity 38,803 33,971 50,542 ------- ------ ------ 143,355 52,814 90,178 ======= ====== ====== (1) Restated to give retroactive effect to the acquisition of LearnLinc which was accounted for as pooling of interest. GILAT COMMUNICATIONS LTD. (An Israeli Corporation) CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2000 Six months ended June 30 2000 1999(1) (Unaudited) U.S. $ in thousands (except per share data) ------------------------- REVENUES 33,513 15,535 COST OF REVENUES: Cost 20,718 7,863 Write-off of inventories associated with Reorganization ------- ------- Total cost of revenues 20,718 7,863 ------- ------- GROSS PROFIT 12,795 7,672 RESEARCH AND DEVELOPMENT COSTS: Expenses - net 2,432 1,335 Acquired research and development 2,095 ------- ------- Total research and development 4,527 1,335 ------- ------- SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 14,213 4,303 AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS 1,437 173 MERGER EXPENSES 3,572 --------------- PROVISION FOR DOUBFUL ACCOUNTS 314 ------- ------ OPERATING INCOME (LOSS) (11,268) 1,861 FINANCIAL INCOME (EXPENSES) - net (1,786) 95 OTHER INCOME (EXPENSES) - net (95) 9 ------- ------ INCOME (LOSS) BEFORE TAXES ON INCOME (13,149) 1,965 ------------------------------------ TAXES ON INCOME (1,402) 104 ------- ------ INCOME (LOSS) BEFORE SHARE IN PROFITS (LOSSES) OF ASSOCIATED COMPANIES (11,747) 1,861 SHARE IN LOSSES OF ASSOCIATED COMPANIES (96) (25) MINORITY INTEREST 57 ------- ------ NET INCOME FOR THE PERIOD (11,786) 1,836 ======= ====== EARNINGS (LOSS) PER SHARE - basic and diluted $(0.95) $0.17 ====== ====== Three months ended Year ended June 30 December 31, 2000 1999(1) 1999(1) (Unaudited) (Audited) U.S. $ in thousands (except per share data) -------------------------------------- REVENUES 18,955 9,031 39,368 COST OF REVENUES: Cost 11,593 4,649 19,283 Write-off of inventories associated with Reorganization 432 ------ ------ ------ Total cost of revenues 11,593 4,649 19,715 ------ ------ ------ GROSS PROFIT 7,362 4,382 19,653 RESEARCH AND DEVELOPMENT COSTS: Expenses - net 1,387 669 3,019 Acquired research and development ------ ------ ------ Total research and development 1,387 669 3,019 ------ ------ ------ SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 7,807 2,308 9,744 AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS 830 86 535 MERGER EXPENSES 39 --------------- PROVISION FOR DOUBFUL ACCOUNTS 314 7,529 ------ ------ ------ OPERATING INCOME (LOSS) (3,015) 1,319 (1,174) FINANCIAL INCOME (EXPENSES) - net (979) (3) (30) OTHER INCOME (EXPENSES) - net (108) 4 (8) ------ ------ ------ INCOME (LOSS) BEFORE TAXES ON INCOME (4,102) 1,320 (1,212) ------------------------------------ TAXES ON INCOME (500) 21 704 ------ ------ ------ INCOME (LOSS) BEFORE SHARE IN PROFITS (LOSSES) OF ASSOCIATED COMPANIES (3,602) 1,299 (1,916) SHARE IN LOSSES OF ASSOCIATED COMPANIES (77) (31) (26) MINORITY INTEREST 29 (13) ------ ------ ------ NET INCOME FOR THE PERIOD (3,650) 1,268 (1,955) ====== ====== ====== EARNINGS (LOSS) PER SHARE - basic and diluted $(0.31) $0.12 $(0.17) ======= ===== ======
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