Gilat Announces 2004 Results

Gilat Announces 2004 Results

    Business Editors/High-Tech Writers

    PETAH TIKVA, Israel--(BUSINESS WIRE)--Feb. 2, 2005--Gilat Satellite Networks Ltd. (Nasdaq:GILTF), a worldwide leader in satellite networking technology, today reported its results for the year ending December 31, 2004.
    Revenues for the fourth quarter of 2004 were $US61.8 million and net loss was US$(1.0) million or US$(0.04) diluted per share. By comparison, revenues for the fourth quarter of 2003 were US$42.4 million and net income was US$33.8 million or US$1.65 diluted per share. The net income for the fourth quarter of 2003 includes a gain from restructuring of debt in the amount of US$58.6 million offset by charges relating to inventory write offs and impairment of long-lived assets in the amount of US$8.1 million. Included in the fourth quarter of 2004 results are US$8.1 million in depreciation and amortization expenses as compared to US$6.4 million for the same period last year.
    Revenues for the year ended December 31, 2004 were US$241.5 million and net loss was US$(9.5) million or US$(0.42) diluted per share. The net loss for the year ended December 31, 2004 includes charges relating to inventory write offs and impairment of long-lived assets in the amount of US$4.2 million. By comparison, revenues for the year ended December 31, 2003 were US$190.2 million and net income was US$143.6 million or US$11.24 diluted per share. The net income for the year ended December 31, 2003 includes a gain from restructuring of debt in the amount of US$244.2 million offset by charges relating to inventory write offs, restructuring charges and impairment of long-lived assets in the amount of US$39.0 million. Included in the year ended December 31, 2004 results are US$31.7 million in depreciation and amortization expenses as compared to US$26.3 million for the year ended December 31, 2003.
    In accordance with the FASB Interpretation No.46, Consolidation of Variable Interest Entities ("FIN 46"), Gilat has consolidated the financial results of StarBand Communications beginning from the first quarter of 2004. As a result of the above, the Company recorded revenues of US$6.9 million, and a net income of US$0.8 million in the fourth quarter of 2004 and revenues of US$28.4 million, and a net income of US$1.3 million for the year ended December 31, 2004.
    The Company reported total cash balances (including cash and cash equivalents, short-term bank deposits, short- and long-term restricted cash and restricted cash held by trustees less short-term bank credits) of US$122.9 million as of December 31, 2004, an increase of US$11.0 million from the cash balance of US$111.9 million as of September 30, 2004.
    Gilat Chief Executive Officer and Chairman of the Board Shlomo Rodav said, "We are back on the growth path. Our revenues are continuing to grow and overall our financial parameters are getting stronger. For the fourth consecutive quarter, we have generated significant growing positive earnings before interest, taxes, depreciation and amortization (EBITDA). In addition, for the first time in several years, this quarter we demonstrate a positive operating income. We have structured the company for growth into 2005 in our solution sales and operation business. Separate growth patterns were defined for each one of the new business units. GNS who will focus on sales of solutions to operators and GNO, which is composed of two service entities, Spacenet, will focus on Enterprise / SoHo networks and our rural networks will focus on public communication services to remote communities."

    Fourth Quarter Events

    Continued deal funnel - Gilat announced new deals in Turkey and the United States.

    New solutions - Gilat introduced new solutions: Sky-Abis, an Integrated Solution for GSM operators and hybrid VSAT/DSL services to its Connexstar family, Spacenet's Prysm application-enhancement services.

--	Gilat announced an agreement with IsNet in Turkey for the supply of a SkyEdge network to include two hubs and 1,500 VSAT terminal sites. The satellite-based remote sites will be dispersed throughout Turkey. The SkyEdge network will allow IsNet to provide data, voice, embedded VPN and video applications to its wide customer base.
--	Spacenet Inc. expanded its Connexstar channel partner program with the addition of Enterprise Satellite Solutions, LLC (ESS), an Arizona-based provider of commercial-grade networking services. ESS, which specializes in complete solutions for multi-location retail businesses, announced a three-year contract to provide a 308-site Connexstar broadband satellite network to the Allsup's convenience store chain in New Mexico and West Texas.
--	Gilat introduced the Sky-Abis, an integrated satellite solution for GSM operators. This solution allows mobile operators to expand their network coverage by providing cellular connectivity to customers located in remote communities while significantly reducing operating costs for existing or new deployments.
--	Spacenet Inc. added commercial-grade, hybrid VSAT/DSL services to its Connexstar family of broadband connectivity solutions. This expansion offering allows the Company to provide DSL, VSAT and hybrid network solutions, depending on the needs of its customers. Spacenet also introduced a new suite of application-enhancing services - to be marketed under the brand "Prysm" - as a complement to its satellite and hybrid network solutions.

    About Gilat Satellite Networks Ltd.

    Gilat Satellite Networks Ltd. (Nasdaq:GILTF) is a leading provider of satellite and hybrid telecommunication solutions and operations. Gilat operates under two business units, Gilat Network Solutions (GNS) and Gilat Network Operations (GNO). With over 500,000 Very Small Aperture Terminals (VSATs) shipped in more than 80 countries across six continents, GNS delivers satellite communication solutions to operators worldwide. GNO provides end-to-end enterprise and consumer networking as well as rural communication operations. Gilat's headquarters is located in Petah Tikva, Israel, Spacenet operation center is in McLean, Virginia and rural operations centers are in Latin America. In addition, Gilat has 13 local offices and 5 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 Skystar Advantage(R), DialAw@y IP(TM), FaraWay(TM), Skystar 360E(TM) and SkyBlaster(a) 360 VSAT products. Gilat SkyEdge, Skystar Advantage, Skystar 360E, DialAw@y IP and FaraWay are trademarks or registered trademarks of Gilat Satellite Networks Ltd. or its subsidiaries. ((a)SkyBlaster is marketed in the United States by StarBand Communications Inc. under its own brand name.)

    Visit Gilat at www.gilat.com.

    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.

Gilat Satellite Networks Ltd. Condensed Consolidated Balance Sheet US dollars in thousands

December 31, December 31, 2004 2003 -------------- ------------ Unaudited Unaudited -------------- ------------ ASSETS

CURRENT ASSETS: Cash and cash equivalents 75,771 51,781 Short-term restricted cash 14,168 6,504 Restricted cash held by trustees 10,620 26,656 Trade receivables (net of allowance for doubtful accounts) 31,380 37,177 Inventories 23,277 37,760 Receivables in respect of capital leases, prepaid expenses and other accounts receivable 29,281 30,761 -------------- ------------ Total current assets 184,497 190,639 -------------- ------------ LONG-TERM INVESTMENTS AND RECEIVABLES: Long-term restricted cash 7,534 13,664 Long-term restricted cash held by trustees 18,994 Severance pay fund 7,933 7,343 Long-term trade receivables, receivables in respect of capital leases and other receivables, net 27,728 39,112 -------------- ------------ 62,189 60,119 -------------- ------------ PROPERTY AND EQUIPMENT, NET 137,198 141,581 -------------- ------------ INTANGIBLE ASSETS AND DEFERRED CHARGES, NET 7,564 9,617 -------------- ------------ TOTAL ASSETS 391,448 401,956 ============== ============

December 31, December 31, 2004 2003 -------------- ------------ Unaudited Unaudited -------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES: Short-term bank credit 4,159 1,770 Current maturities of long-term loans 8,869 3,000 Trade payables 21,245 25,715 Accrued expenses 28,011 35,040 Short-term advances from customer held by trustees 13,500 11,124 Other accounts payable 40,048 39,500 -------------- ------------ Total current liabilities 115,832 116,149 -------------- ------------ LONG-TERM LIABILITIES: Accrued severance pay 8,172 7,151 Long-term advances from customer held by trustees 40,226 28,395 Long-term loans, net of current maturities 108,182 116,526 Accrued interest related to restructured debt 16,793 20,540 Other long-term liabilities 15,951 15,762 Excess of losses over investment in affiliates 2,102 2,543 Convertible subordinated notes 16,171 15,543 -------------- ------------ Total long-term liabilities 207,597 206,460 -------------- ------------

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST 2,946 -------------- ------------

SHAREHOLDERS' EQUITY: Share capital - Ordinary shares of NIS 0.2 par value 984 980 Additional paid in capital 718,096 718,225 Accumulated other comprehensive loss (2,624) (3,818) Accumulated deficit (648,437) (638,986) -------------- ------------ Total shareholders' equity 68,019 76,401 -------------- ------------ Total liabilities and shareholders' equity 391,448 401,956 ============== ============

Gilat Satellite Networks Ltd. Condensed Consolidated Income (Loss) Statements US dollars in thousands

Year ended Three months ended December 31, December 31, 2004 2003 2004 2003 --------- --------- --------- --------- Unaudited Unaudited Unaudited Unaudited --------- --------- --------- --------- Revenues 241,498 190,177 61,801 42,381 Cost of Revenues 162,395 151,113 38,071 34,392 Write-off of inventories 2,000 6,434 3,249 --------- --------- --------- --------- Gross profit 77,103 32,630 23,730 4,740 --------- --------- --------- --------- Research and development expenses: Expenses incurred 19,134 22,063 5,086 4,817 Less - grants and participation 5,255 5,114 810 1,146 --------- --------- --------- --------- Research and development expenses, net 13,879 16,949 4,276 3,671 --------- --------- --------- --------- Selling, general and administrative expenses 69,174 71,720 17,381 17,230 Provision and write-off of doubtful accounts and capital lease receivables 717 1,383 495 (402) Impairment of goodwill 5,000 Impairment of tangible and intangible assets 2,161 26,912 4,882 Restructuring charges 3,905 Gain from derecognition of Liability (245) --------- --------- --------- --------- Operating income (loss) (8,583) (93,239) 1,578 (20,641) --------- --------- --------- --------- Financial income (expenses) - net 1,818 (3,256) (1,021) (1,514) Gain from restructuring of debts 244,203 58,594 Other income (expenses) (274) 954 (82) 253 Gain from investments in affiliates and other companies 3,300 --------- --------- --------- --------- Income (loss) before taxes on income (7,039) 151,962 475 36,692 --------- --------- --------- --------- Taxes on income 4,429 9,690 1,733 1,764 --------- --------- --------- --------- Income (loss) after taxes on income (11,468) 142,272 (1,258) 34,928 --------- --------- --------- --------- Equity in profits (losses) of affiliated companies 1,242 488 305 (2,660) Minority interest in losses of a subsidiary 164 871 1,521 --------- --------- --------- --------- Net income (loss) from continuing operations (10,062) 143,631 (953) 33,789 --------- --------- --------- --------- Gain from cumulative effect of a change in an accounting principle 611 --------- --------- --------- --------- Net income (loss) (9,451) 143,631 (953) 33,789 ========= ========= ========= ========= Net earnings (loss) per share (in US dollars) Basic (0.42) 12.09 (0.04) 1.86 ========= ========= ========= ========= Diluted (0.42) 11.24 (0.04) 1.65 ========= ========= ========= =========

Weighted average number of shares used in computing of net earnings (loss) per share (in thousands) Basic 22,242 11,881 22,286 18,120 ========= ========= ========= ========= Diluted 22,242 12,819 22,286 20,818 ========= ========= ========= =========

--30--KK/se*

CONTACT: Gilat Satellite Networks Ltd. (Investors) Vice President, Finance Tal Payne, +972 3 925 2266 Talp@gilat.com or Gilat Satellite Networks Ltd. (Media) Marketing Manager Shira Gafni, +(972)3-925-2406 shira@gilat.com

KEYWORD: VIRGINIA ISRAEL INTERNATIONAL AFRICA/MIDDLE EAST INDUSTRY KEYWORD: HARDWARE AEROSPACE/DEFENSE TELECOMMUNICATIONS SOFTWARE NETWORKING EARNINGS SOURCE: Gilat Satellite Networks Ltd.

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