ROSH HA'AYIN, Israel, November 3 /PRNewswire-FirstCall/ -- Koor
Industries Ltd. (NYSE:KOR), a leading Israeli investment holding
company, announced today that ECI Telecom (NASDAQ:ECIL), a company
in which Koor holds approximately 30%, has released its
consolidated results of operations for the third quarter and nine
months ended September 30, 2005. Following please find ECI
Telecom's full press release. ECI Telecom Reports Continued Strong
Growth Third Quarter 2005 Revenues Jump 26% Year-over-Year to $162
Million PETACH TIKVA, Israel - ECI Telecom Ltd. (NASDAQ:ECIL), a
global provider of advanced telecommunications solutions to leading
carriers and service providers, reported financial results today
for the third quarter, ended September 30, 2005. Revenues for the
third quarter 2005 reached $162 million, a 26% increase from the
$128 million recorded in the third quarter of 2004 and up 6%
compared to the $153 million recorded in the second quarter of
2005. Net income for the third quarter of 2005 reached $6.2
million, or $0.05 per share on a fully diluted basis, compared with
third quarter 2004 net income of $6.0 million, or $0.05 per share
and compared with $15.6 million, or $0.13 per share, in the second
quarter of 2005. Results for the third quarter include for the
first time the full quarterly results of Laurel Networks, which
amounted to a $7.7 million loss in the quarter. On a non-GAAP
basis, after excluding certain special items included in the second
quarter results and the effect of Laurel, ECI's net income
increased by $2.5 million, from $11.4 million in the second quarter
to $13.9 million in the third quarter. Please see the accompanying
Table 4 for a reconciliation of these special items and the effect
of Laurel Networks on ECI's results. Cash flow from operating
activities totaled $26.7 million for the third quarter of 2005,
bringing the nine month year-to-date cash flow to $151.3 million,
including the positive impact in the second quarter of $96 million
received for the sale of its receivable from Brazilian carrier GVT.
As of September 30, 2005, ECI Telecom's cash, including short and
long-term deposits and marketable securities, totaled $231 million,
or $1.95 per share with no debt. Pro forma, non-GAAP net income for
the third quarter of 2005 was $8.0 million, or $0.07 per diluted
share. ECI's pro forma net income for the three months ended
September 30, 2005 differ from results reported under U.S. GAAP due
to adjustments made for the following on-going, non-cash items: -
The amortization of acquired intangible assets. - The impact of
share-based compensation. Please see the accompanying Table 5 for a
full reconciliation of GAAP to non-GAAP results. Revenues for the
Optical Networks Division totaled $85 million for the third quarter
of 2005, up 23% from the year ago period and up 4% from the second
quarter of 2005. Operating income for the Optical Networks Division
jumped 472% over the third quarter last year and reached $12.7
million, up 43% compared to the second quarter of 2005. The
Division`s operating margin reached 15% in the quarter. The very
strong sequential and year-over-year growth in operating income was
driven by the continued strong demand from carriers for ECI's
optical solutions. This resulted in increased revenues and improved
gross margins for the Division. Revenues for the Broadband Access
Division totaled $68 million for the third quarter of 2005, up 26%
from the year ago period and up 8% from the second quarter of 2005.
Operating income for the Broadband Access Division reached $4.5
million, compared to $6.4 million in both the year ago and second
quarter 2005 periods. The decline in operating income was primarily
related to the geographical sales mix during the quarter as well as
the ramping up of new IPTV deployments in Europe. Revenues for the
new Data Networking Division (formerly Laurel Networks) were still
minimal and totaled $2 million for the third quarter of 2005, while
the operating loss was $7.7 million, reflecting the relatively low
revenues and intensive R&D efforts currently underway in the
Division. ECI`s second quarter 2005 results reflected less than one
month of Laurel`s operations, following its acquisition in June
2005 and included an operating loss of $2.3 million on sales of
$0.4 million. Commenting on the results, Doron Inbar, President and
CEO said, "We are pleased to report another quarter of outstanding
performance. Our core Broadband Access and Optical Networks
divisions continue to demonstrate strong revenue growth and as a
result ECI Telecom continues to grow faster than the broader
telecommunications industry. We are competing successfully in
markets that are among the fastest growing sectors of the telecom
industry. Our success and the strong demand for our products are a
reflection of the quality of our products and our success in
deploying next generation 'triple play' broadband communications
network solutions. "These solutions are a necessity for carriers
and service providers looking to stay competitive in the new
converged communications environment and will drive the industry in
the years to come," continued Inbar. "With the delivery of advanced
services now being the primary driver in the broadband market, ECI
is already enabling carriers to meet these market challenges over
both legacy and next-generation IP networks. We are already a major
supplier of IPTV solutions to one of our primary European
customers, allowing it to deliver hundreds of channels of broadcast
TV over DSL to subscribers. During the quarter another primary
customer has also notified us that we are expected to be a major
supplier to their new major broadband initiative. In addition, our
recently announced Hi-FOCuS 5 IP broadband platform strengthens our
position in this nascent, fast-growing market. This offering allows
us to deliver solutions to both incumbent as well as alternative
carriers seeking to build out new, pure IP networks. "Massive
broadband deployments and the associated rollout of bandwidth
intensive offerings by wireline and cellular service providers are
also driving very strong growth and impressive profitability in our
Optical Networks Division. These deployments necessitate building
out robust metro networks, for which our Multi-Service Provisioning
Platform (MSPP) solutions are very well positioned. We continue to
see strong demand in our core geographic markets such as Western
Europe, Russia, Ukraine, India and the Philippines. "We are
especially pleased with our recently announced $59 million contract
for a nationwide optical backbone wireline network in Costa Rica.
This large turnkey project, one of the biggest in our history, will
be deployed over the next 24 months, and is a prime example of
ECI`s strong market position," concluded Inbar. Chief Operating
Officer Rafi Maor, who will assume the roles of President and CEO
effective January 1, 2006, stated, "To complement our strong
offering and successful Broadband Access and Optical Network
operations, and as part of our strategic effort to be a leading
provider of IP based Triple Play solutions, we are committed to
build a successful Data Networking Division on the basis of
recently acquired Laurel Networks. During the third quarter of
2005, we began the significant effort of integrating Laurel, which
now operates as our new Data Networking Division, into ECI. We are
focused on leveraging the ECI worldwide sales channel network for
our new data networking products. These efforts are expected to
continue to ramp and begin bearing fruits in 2006. ECI Telecom now
offers full-featured data service support and complete Internet
routing in a carrier-class IP-based platform. During the quarter we
rolled out our first integrated solution combining our new Edge
Router product with our Multi-Service Access Gateway (MSAG)
platform to create a comprehensive solution that delivers a full
range of IP video services. In the future we also intend to use the
advanced IP technology of Laurel as a platform for next generation
ECI Access and MSPP products." Guidance ECI continues to expect
sequential quarterly growth in both revenues and profits for the
fourth quarter of 2005. Based on present market conditions, ECI
also expects the growth rate in its business in 2006 to exceed that
of the general telecommunications equipment sector. Veraz Networks
(VoIP) - (43% owned subsidiary of ECI, based in San Jose, Ca.)
Veraz Networks continued to make excellent progress during the
third quarter. Revenues and order intake from IP products continued
to rise significantly and for the first time approached revenues
and order intake of Veraz's legacy DCME product line. During the
third quarter, Veraz announced a significant deployment at Cable
& Wireless to enable the delivery of a suite of pre-paid
services in Panama. Veraz also announced that Starvox
Communications had upgraded its IP infrastructure utilizing Veraz's
Softswitch and Media gateway products across the U.S. Veraz
Networks launched its new Veraz Messaging Solution (VMS) that
enables service providers to offer messaging services beyond basic
voice messaging to deliver advanced, real-time multimedia
messaging. Additionally, Veraz Networks announced the extension of
the applications portability capabilities, enabling advanced Fixed
Mobile Convergence (FMC) by unifying the service layer and
facilitating application portability across wireline and wireless
networks. Nine Months Results For the first nine months of 2005,
revenues reached $461 million, a 29% increase from the $357 million
reported for the first nine months of 2004. Net income was $32.2
million, or $0.27 per share fully diluted, compared to net income
of $1.3 million, or $0.01 per share, for the first nine months of
2004. Conference Call & Webcast A conference call to discuss
ECI Telecom's third quarter 2005 financial results will take place
today, Thursday, November 3, 2005, at 8:30 am EST, 3:30 pm Israel
time. To access the conference call, please dial one of the
following numbers: US: (800)-230-1093, International:
+1-612-332-0636, Israel (new number): +1-80-937-0052 A replay
option will be available after the conference call, from 12:00 pm
EST on November 3, 2005, through November 10, 2005, at 11:59 pm
EST. Replay numbers: US: (800)-475-6701, International
+1-320-365-3844. Access code for both: 799530 A webcast of the
conference call can be accessed on the ECI Telecom website at
http://www.ecitelecom.com/. A replay of the webcast will also be
available on ECI Telecom's website. About ECI Telecom ECI provides
advanced telecommunications solutions to leading carriers and
service providers worldwide. By translating a deep understanding of
their needs into innovative, technologically advanced solutions,
ECI enables its customers to increase the value of the
infrastructure of their networks and reduce operating expenses.
ECI's platforms provide carriers and service providers with
carrier-grade solutions for easily introducing new
revenue-generating services. ECI provides innovative IP service
delivery solutions to the converged telecom networks encompassing
Broadband access gateways, Service Edge Routers, Optical transport,
Core IP/MPLS routers, NGN VoIP and multimedia applications and
services. ECI maintains a global sales, marketing and customer
support network, as well as a host of strategic channel
relationships worldwide. Certain statements contained in this
release may contain forward-looking information with respect to
plans, projections, or future performance (including guidance on
future financial performance) of the Company. By their nature,
forward-looking statements involve certain risks and uncertainties
including, but not limited to, the failure to occur of the
anticipated fast growth of the broadband and cellular markets and
our inability to respond to those changes if they occur, our
inability to capitalize on the Laurel acquisition through new
product introductions and increased sales of Laurel products
through our sales network, risks relating to the integration of
Laurel's operations into our own, the impact of the newly adopted
SFAS 123R regarding the expensing of option-based payments, which
is expected to result in higher compensation expenses, actual
revenues earned from announced contracts, the possibility of future
net losses, rapid technological change in our markets, possible
impact of customer dissatisfaction with some of our newer products,
competitive factors, price erosion in the market for certain of our
products, dependence on large customers, fluctuations in our
quarterly and annual results, risks associated with international
sales, risks relating to our intellectual property, the failure of
the geographic and product markets in which we sell to grow as
anticipated, unexpected tax demands, currency fluctuations,
potentially disruptive acquisitions, dependence on limited
suppliers and subcontractors, as well as risks related to
operations in Israel, and other risks detailed in the Company's
annual report on Form 20-F for the year ended December 31, 2004 and
other filings with the Securities and Exchange Commission. About
Koor Industries Koor Industries is a leading investment holding
company, focusing on high-growth, internationally-oriented, Israeli
companies. Koor actively invests in telecommunications through its
holdings in ECI Telecom (NASDAQ: ECIL), Telrad Networks and ECTel
(NASDAQ:ECTX); in agrochemicals through Makhteshim Agan Industries
(TASE:MAIN); in defense electronics through the Elisra Defense
Group, Tadiran Communications (TASE:TDCM) and Elbit Systems
(NASDAQ:ESLT); and in promising start-ups through Koor Corporate
Venture Capital. Koor's ADSs (American Depositary Shares) are
traded on the New York Stock Exchange (NYSE:KOR) and Koor's
ordinary shares are traded on the Tel Aviv Stock Exchange
(TASE:KOR). For additional information on Koor please visit our
website - http://www.koor.com/. For further information, please
contact: Ran Maidan - Senior Vice President and CFO, Koor
Industries - Tel. +972-3-9008-310 Or Fiona Darmon - Vice President
Investor Relations, Koor Industries - Tel. +972-3-9008-417 Forward
looking statements in this release involve a number of risks and
uncertainties including, but not limited to, international market
conditions, domestic political factors, technological developments,
ability to finance operations, and other factors which are detailed
in the Company's SEC filings. TABLE - 1 ECI TELECOM LTD. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In millions of
U.S. dollars, except per share figures) Three Months Three Months
Ended Nine Months Ended ended September 30, September 30, June 30,
------------------ ----------------- -------- 2005 2004 2005 2004
2005 ------- -------- -------- -------- -------- Revenues 162.4
128.5 460.8 357.0 152.9 Cost of revenues 94.0 77.9 266.1 216.6 86.5
------------ ------- -------- -------- -------- Gross profit 68.4
50.5 194.7 140.4 66.4 Research and development costs, net 24.6 15.6
63.5 47.7 21.1 Selling and marketing expenses 25.8 19.5 71.2 56.9
24.1 General and administrative expenses 10.5 9.0 31.2 25.8 10.6
Amortization of acquisition-related intangible assets 1.0 - 1.5 -
0.5 Recovery of doubtful debt - - (10.4) - (10.4) Impairment of
loans - - 3.0 - 3.0 Purchase of in-process research and development
- - 0.9 - 0.9 Restructuring expenses - - - 2.6 - ------------
------ ---------- ------ --------- Operating income 6.5 6.4 33.7
7.4 16.7 Financial income, net 1.5 0.7 3.5 1.5 1.2 Other income
(expenses), net (0.1) 1.4 0.3 1.0 (0.3) ------------ ------
---------- ------ --------- Income from continuing operations
before taxes on income 8.0 8.5 37.6 10.0 17.5 Taxes on income (0.8)
(0.5) (2.7) (1.3) (0.9) ------------ ------ ---------- ------
--------- Income from continuing operations after taxes on income
7.2 8.0 35.0 8.6 16.6 Company's equity in results of investee
companies - net (1.1) (1.7) (2.6) (3.1) (0.7) Minority interest in
results of subsidiaries - net 0.2 (0.3) (0.1) (0.3) (0.4)
----------- ------- ---------- ------ --------- Income from
continuing operations 6.2 6.0 32.2 5.2 15.6 Loss from discontinued
operations, net of tax - - - (3.9) - ----------- ------- ----------
------ --------- Net income 6.2 6.0 32.2 1.3 15.6 ===========
======= ========== ====== ========= Basic earnings per share
Continuing operations 0.06 0.06 0.29 0.05 0.14 Discontinued
operations - - - (0.04) - ----------- ------- --------- ------
---------- 0.06 0.06 0.29 0.01 0.14 =========== ======= =========
====== ========== Weighted average number of shares outstanding
used to compute basic earnings per share - in millions 110.6 108.7
110.1 108.4 110.1 =========== ====== ========== ====== ==========
Diluted earnings per share Continuing operations 0.05 0.05 0.27
0.04 0.13 Discontinuing operations - - - (0.03) - -----------
------ ---------- ------ ---------- 0.05 0.05 0.27 0.01 0.13
=========== ====== ========== ====== ========== Weighted average
number of shares outstanding used to compute diluted earnings per
share - in millions 118.3 116.5 118.2 116.3 117.8 ===========
====== ========== ========= ======= TABLE - 2 ECI TELECOM LTD. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions of U.S.
dollars) September 30, June 30, December 31, 2005 2005 2004
----------- ---------- ------------ Assets Current Assets
-------------- Cash and cash equivalents 50.7 60.0 74.2 Short-term
investments 41.7 39.9 24.7 Trade Receivables 151.5 156.5 142.9
Other receivables and prepaid expenses 24.5 27.1 29.4 Work in
progress 4.5 4.5 3.2 Inventories 165.3 170.3 175.1 -----------
---------- ------------ Total current assets 438.2 458.3 449.6
----------- ---------- ------------ Long-term receivables, net 8.1
8.1 90.0 ----------- ---------- ------------ Long-term deposits and
marketable securities 138.1 114.3 119.4 ----------- ----------
------------ Assets held for severance benefits 25.1 24.1 25.2
----------- ---------- ------------ Investments 21.6 22.7 26.8
----------- ---------- ------------ Property, plant and equipment,
net 118.9 119.3 119.4 ----------- ---------- ------------ Software
development costs, net 12.0 13.3 14.4 ----------- ----------
------------ Goodwill 39.3 38.1 1.0 ----------- ----------
------------ Other assets 48.6 47.2 9.1 ----------- ----------
------------ ----------- ---------- ------------ Total assets 849.8
845.4 854.8 =========== ========== ============ Liabilities and
shareholders' equity Current liabilities -------------------
Short-term bank loans and current maturities - - 30.0 Trade
payables 59.3 59.0 68.4 Other payables and accrued liabilities
126.4 133.3 149.6 ----------- ---------- ------------ Total current
liabilities 185.6 192.3 248.0 ----------- ---------- ------------
Long-term liabilities --------------------- Other liabilities 0.1
0.2 - Liability for employee severance benefits 47.6 47.2 50.9
----------- ---------- ------------ Total long-term liabilities
47.7 47.3 50.9 ----------- ---------- ------------ -----------
---------- ------------ Total liabilities 233.4 239.6 299.0
----------- ---------- ------------ Minority Interest 4.1 4.3 4.1
----------- ---------- ------------ Shareholders' equity
-------------------- Share capital 6.2 6.2 6.2 Capital surplus
646.1 644.9 642.2 Accumulated other comprehensive income (loss)
11.7 8.4 (12.6) Accumulated deficit (51.8) (58.0) (84.0)
----------- ---------- ------------ Total shareholders' equity
612.3 601.5 551.8 ----------- ---------- ------------ -----------
---------- ------------ Total Liabilities and shareholders' equity
849.8 845.4 854.8 =========== ========== ============ TABLE - 3 ECI
TELECOM LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of U.S. dollars, except per share figures) Three
Months Nine Months Ended Ended September 30, September 30,
--------------- -------------- 2005 2004 2005 2004 -------- ------
------- ------ Cash flows from operating activities Net income 6.2
6.0 32.2 1.3 Adjustments to reconcile net income to cash provided
by operating activities: Depreciation and amortization 10.0 8.5
28.5 26.8 Amortization of share based compensation 0.8 0.1 0.8 1.6
Capital Losses (gains), net 0.0 0.1 (2.2) 3.9 Impairment of loans -
- 3.0 - Other, net (0.1) (1.1) 3.4 0.8 In-process research and
development costs - - 0.9 - Company's equity in results of investee
companies 1.1 1.7 2.6 3.1 Minority interest in net results of
subsidiaries (0.2) 0.3 0.1 0.3 Decrease (increase) in working
capital (including non-current maturities of trade receivables) 8.3
(10.3) 85.3 (0.6) Decrease in other long-term liabilities (0.0)
(2.5) (0.0) (2.5) Increase (decrease) in liability for employee
severance benefits 0.4 (0.2) (3.4) (2.2) -------- ------ -------
------ Net cash provided by operating activities 26.7 2.7 151.3
32.4 -------- ------ ------- ------ Cash flows for investing
activities Investments in deposits, net (0.9) (0.1) (1.5) 1.1
Software development costs capitalized (1.9) (3.0) (6.1) (9.1)
Investment in property, plant and equipment (5.2) (3.3) (14.5)
(17.8) Proceeds from sale of property, plant and equipment 0.2 0.2
0.8 1.2 Investments in investee companies (0.1) (0.5) (0.6) (1.2)
Proceeds from realization of an investee company - - 2.4 -
Acquisition of operation (5.3) - (10.7) - Acquisition of newly
consolidated subsidiary (1.2) - (85.9) - Investments in marketable
securities, net (21.2) 4.4 (30.1) (52.0) Changes in assets held for
severance benefits (0.5) 0.7 (0.4) 0.8 -------- ------ -------
------ Net cash used in investing activities (36.2) (1.6) (146.6)
(77.0) -------- ------ ------- ------ Cash flows from financing
activities Repayment of long-term loans - - (30.0) (22.5) Decrease
in short-term credit, net - 0.0 - 0.1 Exercise of employee stock
options 0.4 0.9 3.1 1.5 -------- ------ ------- ------ Net cash
provided by (used in) financing activities 0.4 0.9 (26.9) (20.9)
-------- ------ ------- ------ Effect of change in exchange rate on
cash (0.2) 0.2 (1.2) (0.8) -------- ------ ------- ------ Changes
in cash and cash equivalents (9.3) 2.2 (23.4) (66.3) Cash and cash
equivalents at beginning of period 60.0 57.9 74.2 126.4 --------
------ ------- ------ Cash and cash equivalents at end of period
50.7 60.1 50.7 60.1 ======== ====== ======= ====== TABLE - 4 ECI
TELECOM LTD. AND SUBSIDIARIES RECONCILIATION REPORT This schedule
is to assist the reader in reconciling from the GAAP reported net
income to net income excluding certain special items and Laurel
Networks' results (In millions of U.S. dollars) Three Months ended
------------------------ September 30, June 30, 2005 2005
Difference ------------ -------- ---------- Net income (GAAP
reported) 6.2 15.6 (9.4) Special items ------------- Recovery of
doubtful debt - (10.4) 10.4 Impairment of loans - 3.0 (3.0)
Purchase of in-process research and development - 0.9 (0.9)
--------- ---------- ---------- Total special items - (6.5) 6.5
--------- ---------- ---------- Net income excluding special items
6.2 9.1 (2.9) Laurel Networks' net loss 7.7 2.3 5.4 ---------
---------- ---------- Net income excluding special items and Laurel
Networks' results 13.9 11.4 2.5 ========= ========== ==========
TABLE - 5 ECI TELECOM LTD. AND SUBSIDIARIES PROFORMA CONSOLIDATED
STATEMENTS OF OPERATIONS This schedule is to assist the reader in
reconciling from the GAAP reported results to Proforma results (In
millions of U.S. dollars, except per share figures) Three months
ended September, 30 2005 ------------------------------ GAAP
Proforma Reported Adjustments Proforma
------------------------------ Revenues 162.4 162.4 Cost of
revenues 94.0 0.2 (a) 93.9 -------- ------- --------- Gross profit
68.4 (0.2) 68.5 Research and development costs, net 24.6 0.3 (a)
24.3 Selling and marketing expenses 25.8 0.2 (a) 25.5 General and
administrative expenses 10.5 0.1 (a) 10.3 Amortization of
acquisition-related intangible assets 1.0 1.0 - -------- -------
--------- Operating income 6.5 (1.8) 8.3 Financial income, net 1.5
1.5 Other income (expenses), net (0.1) (0.1) -------- -------
--------- Income from continuing operations before taxes on income
8.0 (1.8) 9.7 Taxes on income (0.8) (0.8) -------- -------
--------- Income from continuing operations after taxes on income
7.2 (1.8) 9.0 Company's equity in results of investee companies -
net (1.1) (1.1) Minority interest in results of - subsidiaries -
net 0.2 0.2 -------- ------- --------- Net income 6.2 (1.8) 8.0
======== ======= ========= Basic earnings per share --------
------- --------- Continuing operations 0.06 (0.02) 0.07 ========
======= ========= Weighted average number of shares outstanding
used to compute basic earnings per share - in thousands 110.6 110.6
110.6 ======== ======= ========= Diluted earnings per share
-------- ------- --------- Continuing operations 0.05 (0.02) 0.07
======== ======= ========= Weighted average number of shares
outstanding used to compute diluted earnings per share - in
thousands 118.3 118.3 118.3 ======== ======= ========= (a) Share
based compensation. DATASOURCE: Koor Industries Ltd. CONTACT: For
further information, please contact: Ran Maidan - Senior Vice
President and CFO, Koor Industries - Tel. +972-3-9008-310 Or Fiona
Darmon - Vice President Investor Relations, Koor Industries - Tel.
+972-3-9008-417
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