Financial: ECI Telecom Q3 and First Nine Month 1998 Results - Company Financial Information

EDGE, On & About AT&T, Nov 2, 1998

ECI TELECOM LTD. (NASDAQ/NM Symbol: ECILF), Tuesday announced consolidated unaudited results of operations for the third quarter and nine months ended September 30, 1998. Revenues for the third quarter increased by 24% to $210,189,000 compared with $169,360,000 for the comparable period in 1997, and gross profits rose 30% from $92,606,000 to $120,172,000.

During the quarter, the Company recorded a $14,371,000 one-time expense for in-process R&D associated with the previously announced purchase of NKO, resulting in reported operating income of $32,910,000 and reported net income of $30,000,000, or $0.39 per share ($0.38 fully diluted). Excluding this expense, operating income for the third quarter of 1998 would have been $47,281,000, an increase of 44% as compared to $32,825,000 for the third quarter of 1997. Also excluding this expense, net income for the quarter would have been $44,371,000, or $0.58 per share ($0.56 fully diluted), an increase of 33% as compared to $33,444,000, or $0.44 per share, in the third quarter of last year. Last year, third quarter results included a one-time expense associated with the restructuring of a European subsidiary in the amount of $2,109,000. Revenues for the nine months ended September 30, 1998 increased by 20% to $591,398,000 compared with $491,643,000 for the comparable period in 1997. Gross profits rose 33% from $253,394,000, to $337,389,000 in the first nine months of 1998. Reported operating income for the nine months was $117,449,000 and reported net income was $109,411,000, or $1.43 per share ($1.38 fully diluted). Excluding the abovementioned one-time expense, operating income for the nine months would have increased by 37% from $95,956,000 to $131,820,000. Also excluding the expense, net income for the nine months would have risen 33% to $123,782,000 or $1.61 per share ($1.56 fully diluted), compared to $93,050,000 or $1.22 per share ($1.19 fully diluted) in 1997. Last year, results for the first 9 months included a one-time expense associated with the restructuring of a European subsidiary in the amount of $2,109,000. Excluding the one-time expense, net margins were 21.1% compared to 19.7% in the third quarter of 1997. Gross margins maintained record levels of 57.2% as compared to 54.7% last year, attributable primarily to the product mix, as well as increased operating efficiencies and cost reduction programs in all SBUs. Operating margins of 22.5% were also very strong, and compared to 19.4% for the comparable quarter last year. During the third quarter, the DCME, Access Solutions, and ECTEL strategic business units (SBUs) recorded particularly strong growth. Commenting on the results, David Rubner, President and CEO of the Company said, "We are very pleased with the solid revenue growth and profitability we achieved in the third quarter, along with the record gross and net margins. "During the quarter, we continued to make substantial progress from a marketing point of view. The worldwide trend of replacing DTX 240 DCME equipment with the DTX 360 continues to benefit ECI, and during the quarter we continued our penetration of the cellular markets in China and Portugal. The Access SBU had an excellent quarter, winning a prestigious contract by Deutsche Telekom for its new ADSL solution, and initiating sales of its new Hi-FOCuS product in the UK. SDH sales were also strong. SDH activity included the sale of SDH radio services to a cellular operator, an SDH solution for cable TV operators, and a T1 drop solution for an important project in the Asia Pacific market. "During the 3rd quarter, we began commercial installation of the Multigate cable TV solution at Telenet Flanders in Belgium. Customers will be connected to this service beginning next week. During the quarter, we also announced our purchase of NKO's IP telephony development division. "We are making progress in the due diligence process with regard to our intended acquisition of Tadiran Telecommunications Ltd., which we announced during the quarter. The definitive agreement, which we had hoped to sign by the end of October, is now planned for the middle of November". Mr. Rubner concluded, "Overall, we are very pleased with our third quarter performance. We continue to expand our marketing reach with important strategic partnerships, and our R&D efforts remain on track. We look forward to continued growth in the quarter ahead." Further to the Board of Directors' decision, an interim quarterly cash dividend of $0.05 per share will be paid on or about 20th November, 1998. The dividend, net of taxes to be withheld at source and in compliance with Israel's foreign currency law, will be paid to shareholders of record as of close of business on 6th November, 1998. A provider of integrated network solutions, ECI TELECOM designs, develops, manufacturers and markets digital telecommunications and data transmission systems, enabling network operators to deliver cost-effective services. ECI TELECOM's systems provide capacity expansion, flexibility and management functions to better utilize existing and new telecommunications, data and integrated networks. FMI: http//www.ecitele.com.