Gilat Announces Results for the Third Quarter, 2008

PETAH TIKVA, Israel--(BUSINESS WIRE)--Gilat Satellite Networks Ltd. (Nasdaq:GILT), a worldwide leader in satellite networking technology, solutions and services, today reported its results for the third quarter ending September 30, 2008.

Revenues for the third quarter of 2008 were $65.3 million, compared to $71.5 million for the same period in 2007. Net loss for the third quarter of 2008 was $0.5 million or $0.01 per diluted share, compared to a net income of $5.9 million or $0.14 per diluted share in the third quarter of 2007. Non-GAAP net income for the third quarter of 2008 was $0.6 million, or $0.01 per diluted share, compared to net income of $6.1 million, or $0.15 per diluted share in the third quarter of 2007.

Revenues for the nine month period ended September 30, 2008 were $201.4 million, compared to $209.9 million in the comparable period of 2007. Net income for the nine month period ended September 30, 2008 was $5.3 million or $0.13 per diluted share, compared to net income of $16.3 million or $0.39 per diluted share in the same period of 2007. Non-GAAP net income for the nine month period ended September 30, 2008 was $7.8 million, or $0.19 per diluted share, versus a net income of $17.4 million, or $0.42 per diluted share, in the comparable period of 2007.

Gilat’s Chief Executive Officer and Chairman of the Board Amiram Levinberg said, “Our financial results in the third quarter reflect a decline in GNS's business, primarily attributable to lengthened sales cycles, partially offset by strong activity in the U.S. with the receipt of several major orders for gaming and other applications. Our business remains steady and the Company is in a strong financial position. We have a strong balance sheet carrying a sizeable amount of cash with relatively little debt that can support us even if business slows down due to economic hardships and may open for us interesting acquisition opportunities going forward.”

During the quarter, Gilat filed a lawsuit against each of the parties that had guaranteed the payment of a termination fee under the Merger Agreement. This follows the termination of the Agreement and Plan of Merger entered into on March 31, 2008.

The Company also announced that it has not yet been able to reach resolution with the government of Colombia relating to the Compartel projects that were under renegotiation and were to have been signed in September 2008. More details will be provided in the Company’s quarterly investor call.

Recent Announcements

• Mongolia’s Incomnet expanded its SkyEdge network to include a Gilat cellular backhaul solution to serve Mongolia's mobile operators. Gilat's SkyAbis cellular backhaul solution, based on the SkyEdge multi-service platform enables operators to deploy hybrid networks that extend the reach of their terrestrial and cellular infrastructure to remote communities.
• A major international cellular operator in Bolivia is deploying a Gilat SkyEdge II network to provide cellular backhaul services throughout the country. Following the successful deployment of the initial phase of the new network which provides cellular backhaul services to 50 base station sites in the country, the operator is currently expanding the network to cover an additional 50 sites. The network will bring voice and data services to the country's remote regions.
• Costa Rica’s national telecommunications operator, ICE, selected Gilat’s SkyEdge broadband satellite network to serve end users throughout Costa Rica with telephony and wireless Internet access services.
• Gilat deployed a SkyEdge broadband satellite network in Honduras for Administradora de Redes (Aduanett), a private company owned by Honduras’ leading customs brokers. The network provides high-speed Internet and data connectivity to customs offices and other businesses.

Conference Call & Webcast

Gilat will host a conference call today at 9:30 AM Eastern Time. In order to ensure audio access, participants from the U.S. should dial in at (888) 281-1167 and international participants should dial in at (972) 3-918-0692. The live presentation may also be accessed via Webcast through the Company’s website at www.gilat.com prior to the call. A replay of the call will be available beginning at approximately 12:00 PM Eastern Time, November 24, 2008 until November 26, 2008 at 12:00 PM.

To listen to the replay, U.S. participants should call (888) 326-9310 and international participants should call (972) 3-925-5947. The call will also be available for replay as a Webcast on the Company’s website at www.gilat.com and will be archived for 30 days.

About Gilat Satellite Networks Ltd.

Gilat Satellite Networks Ltd. (Nasdaq and TASE: GILT) is a leading provider of products and services for satellite-based communications networks. The Company operates three business units: (i) Gilat Network Systems ("GNS"), which is a provider of network systems and associated professional services to service providers and operators worldwide; (ii) Spacenet Inc., which provides managed services in North America 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 750,000 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 16 sales and service offices worldwide. Gilat markets the SkyEdge™ and SkyEdge II Product Family, which includes the SkyEdge Pro, SkyEdge IP, SkyEdge Call, SkyEdge DVB-RCS and SkyEdge Gateway.

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.

Notes:

(1) The attached summary financial statements were prepared in accordance with U.S. GAAP. The attached summary financial statements for Q3 2008 are unaudited. To supplement the consolidated financial statements presented in accordance with GAAP, the Company presents Gilat’s net income, EBITDA and earnings per diluted share, before the expenses related to the merger transaction and the share-based payment charge, which is the non-cash stock option expense as per SFAS 123 (R). This non-GAAP presentation of net income, EBITDA and earnings per share is provided to enhance the understanding of the Company’s historical financial performance and comparability between periods.

(2) Operating income (loss) before depreciation, amortization, non cash stock option expenses as per SFAS 123(R) 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.

GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
US dollars in thousands
		September 30,			December 31,
		2008			2007
		Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		112,298			122,807
Short- term bank deposits and Held to maturity marketable securities		29,603			45,578
Short-term restricted cash		8,554			7,091
Restricted cash held by trustees		7,498			7,450
Trade receivables, net of allowance for doubtful accounts		55,188			43,746
Inventories		23,998			24,794
Other current assets		21,311			24,748
Total current assets		258,450			276,214
LONG-TERM INVESTMENTS AND RECEIVABLES:
Long-term restricted cash		5,289			6,321
Long-term restricted cash held by trustees		16,701			16,544
Severance pay fund		13,354			11,835
Long-term trade receivables, receivables in respect of capital
leases and other receivables		9,927			9,170
Total long-term investments and receivables		45,271			43,870
PROPERTY AND EQUIPMENT, NET		107,777			105,247
INTANGIBLE ASSETS AND DEFERRED CHARGES, NET		3,912			4,771
TOTAL ASSETS		415,410			430,102
GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
US dollars in thousands
		September 30,			December 31,
		2008			2007
		Unaudited
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank credit		5,500			5,823
Current maturities of long-term loans		5,357			5,354
Trade payables		18,591			25,954
Accrued expenses		24,311			20,275
Short-term advances from customer held by trustees		15,209			15,005
Other current liabilities		43,617			58,686
Total current liabilities		112,585			131,097
LONG-TERM LIABILITIES:
Accrued severance pay		13,631			11,723
Long-term advances from customer held by trustees		8,989			8,989
Long-term loans, net		14,389			18,704
Accrued interest related to restructured debt		2,165			2,493
Convertible subordinated notes		16,315			16,315
Other long-term liabilities		11,000			12,971
Total long-term liabilities		66,489			71,195
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Share capital - Ordinary shares of NIS 0.2 par value		1,821			1,796
Additional paid in capital		862,216			859,207
Accumulated other comprehensive income		1,934			1,776
Accumulated deficit		(629,635	)		(634,969	)
Total shareholders' equity (deficiency)		236,336			227,810
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		415,410			430,102

GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except per share data)
						Nine months ended					Three months ended
						September 30,					September 30,
						2008			2007		2008			2007
						Unaudited			Unaudited		Unaudited			Unaudited
Revenues						201,425			209,915		65,295			71,548
Cost of Revenues						135,757			134,279		45,917			45,750
Gross profit						65,668			75,636		19,378			25,798
Research and development expenses:
Expenses incurred						13,293			12,846		4,359			4,109
Less - grants						1,380			1,756		604			481
						11,913			11,090		3,755			3,628
SMG&A						48,570			51,554		15,133			17,372
Operating income						5,185			12,992		490			4,798
Financial income,net and other						2,261			3,858		577			1,136
Expenses related to merger transaction						(1,972	)		-		(1,039	)		-
Other income						1,182			-		-			-
Income before taxes on income						6,656			16,850		28			5,934
Taxes on income						1,322			545		574			81
Net income (loss)						5,334			16,305		(546	)		5,853
Basic net earnings (loss) per share						0.13			0.42		(0.01	)		0.15
Diluted net earnings (loss) per share						0.13			0.39		(0.01	)		0.14
Weighted average number of shares used in computing net earnings (loss) per share
Basic						39,852			39,026		39,989			39,228
Diluted						42,229			41,398		39,989			41,672

GILAT SATELLITE NETWORKS LTD.
RECONCILIATION BETWEEN GAAP AND NON-GAAP STATEMENTS OF OPERATIONS
FOR COMPARATIVE PURPOSES
U.S. dollars in thousands (except per share data)
									Nine months ended				Three months ended
									September 30,				September 30,
									2008		2007		2008			2007
									Unaudited		Unaudited		Unaudited			Unaudited
			GAAP operating income						5,185		12,992		490			4,798
			Non-cash stock options expenses (1)						518		1,064		138			288
			Non-GAAP operating income						5,703		14,056		628			5,086
			GAAP net income (loss)						5,334		16,305		(546	)		5,853
			Non-cash stock options expenses (1)						518		1,064		138			288
			Expenses related to merger transaction						1,972		-		1,039
			Non-GAAP net income (loss)						7,824		17,369		631			6,141
			GAAP Earnings (loss) per share (diluted)						0.13		0.39		(0.01	)		0.14
			Non-cash stock options expenses (1)						0.01		0.03		0.00			0.01
			Expenses related to merger transaction						0.05				0.02
			Non-GAAP Earnings (loss) per share (diluted)						0.19		0.42		0.01			0.15
(1	)		Non-cash stock options expenses:
			Cost of Revenues						21		8		7			4
			Research and development						1		6		-			1
			Selling, general, marketing and administrative						496		1,050		131			283
									518		1,064		138			288

GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
US dollars in thousands
					Nine months ended						Three months ended
					September 30,						September 30,
					2008			2007			2008			2007
					Unaudited			Unaudited			Unaudited			Unaudited
Cash flows from operating activities:
Net income (loss)					5,334			16,305			(546	)		5,853
Adjustments required to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization					9,625			14,963			3,333			4,786
Impairment of Long lived and other assets					418			-			418			-
Stock compensation related to employees stock options					518			1,064			138			288
Accrued severance pay, net					388			(20	)		172			(161	)
Interest accrued on short and long-term restricted cash					(204	)		(1,099	)		292			(363	)
Interest on held to maturity marketable securities					(1,777	)		(1,608	)		(142	)		(671	)
Exchange rate differences on long-term loans					(34	)		503			(538	)		363
Exchange rate differences on loans to employees					21			(128	)		1			(169	)
Capital loss from disposal of property and equipment					51			153			-			78
Deferred income taxes					(220	)		(595	)		6			(247	)
Decrease (increase) in trade receivables, net					(11,628	)		(13,795	)		2,407			(6,531	)
Decrease (increase) in other assets (including short-term, long-term
and deferred charges)					(2,558	)		15,151			1,660			10,783
Decrease (increase) in inventories					(2,274	)		4,503			163			454
Decrease in trade payables					(7,663	)		(2,640	)		(8,847	)		(2,765	)
Increase (decrease) in accrued expenses					4,004			(2,088	)		4,600			(138	)
Increase (decrease) in advances from customer, held
by trustees, net					204			(8,141	)		(292	)		(619	)
Decrease in other accounts payable and other long term liabilities,
mainly deferred revenues					(14,995	)		(12,502	)		(1,453	)		(11,019	)
Net cash provided by (used in) operating activities					(20,790	)		10,026			1,372			(78	)
GILAT SATELLITE NETWORKS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
US dollars in thousands
					Nine months ended						Three months ended
					September 30,						September 30,
					2008			2007			2008			2007
					Unaudited			Unaudited			Unaudited			Unaudited
Cash flows from investing activities:
Purchase of property and equipment					(8,728	)		(5,714	)		(4,403	)		(2,760	)
Return on investment					1,182			-			-			-
Other investments					(195	)		-			-			-
Purchase of held to maturity marketable securities					(100,375	)		(67,645	)		(19,816	)		(4,285	)
Proceeds from held to maturity marketable securities					118,128			19,934			87,056			14,459
Proceeds from sale of property and equipment					426			-			-			-
Loans to employees, net					2,792			845			14			398
Proceeds from restricted cash held by trustees					-			92			-			-
Investment in restricted cash (including long-term)					(602	)		(5,952	)		(5	)		(1,483	)
Proceeds from restricted cash (including long-term)					171			3,824			-			3
Net cash provided by (used in) investing activities					12,799			(54,616	)		62,846			6,332
Cash flows from financing activities:
Exercise of options, net					2,516			3,092			651			1,467
Issuance of shares, net of issuance expenses					-			(262	)		-			(3	)
Short-term bank credit, net					(322	)		4,623			-			(5	)
Proceeds from long-term loans					-			1,000			-			1,000
Repayments of long-term loans					(4,278	)		(5,949	)		(4,086	)		(4,556	)
Net cash provided by (used in) financing activities					(2,084	)		2,504			(3,435	)		(2,097	)
Effect of exchange rate changes on cash and cash equivalents					(434	)		798			(1,177	)		259
Increase (decrease) in cash and cash equivalents					(10,509	)		(41,288	)		59,606			4,416
Cash and cash equivalents at the beginning of the period					122,807			149,545			52,692			103,841
Cash and cash equivalents at the end of the period					112,298			108,257			112,298			108,257

GILAT SATELLITE NETWORKS LTD.
CONDENSED EBITDA
US dollars in thousands
				Nine months ended				Three months ended
				September 30,				September 30,
				2008		2007		2008		2007
				Unaudited		Unaudited		Unaudited		Unaudited
Operating income				5,185		12,992		490		4,798
Add:
Non-cash stock option expenses				518		1,064		138		288
Deprecation and amortization and impairment of tangible assets				9,625		14,963		3,333		4,786
EBITDA				15,328		29,019		3,961		9,872