EXHIBIT C
ECI Telecom Ltd.
Condensed Interim Consolidated Financial Statements as at September 30, 2000
(Unaudited)
--------------------------------------------------------------------------------
Contents
Page
Review Letter 1
Interim Consolidated Balance Sheets 2
Interim Consolidated Statements of Income 4
Interim Consolidated Statement of Comprehensive Income 5
Interim Consolidated Statements of Changes in Shareholders' Equity 6
Interim Consolidated Statements of Cash Flows 8
Condensed Notes To The Interim Consolidated Financial Statements 10
ECI TELECOM LTD.
CONDENSED
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
<PAGE>
<TABLE>
<CAPTION>
ECI Telecom Ltd.
Interim Consolidated Balance Sheets
------------------------------------------------------------------------------------------------------------------
September 30, September 30, December 31,
2000 1999 1999
(Unaudited) (Unaudited) (Audited)
-------------- -------------- --------------
$ in thousands $ in thousands $ in thousands
-------------- -------------- --------------
Assets
Current assets
<S> <C> <C> <C>
Cash and cash equivalents 114,267 159,976 232,144
Short-term investments 57,973 156,230 227,619
Receivables:
Trade 523,977 491,761 435,706
Other 68,921 66,945 97,797
Prepaid expenses 12,727 8,141 6,889
Recoverable costs and estimated
earnings, not yet billed 18,692 22,052 13,082
Inventories 287,190 204,186 185,754
Net balance of discontinuing operations 678 - -
--------------- --------------- ---------------
Total current assets 1,084,425 1,109,291 1,198,991
--------------- --------------- ---------------
Long-term bank deposits and receivables,
net of current maturities 167,035 98,262 105,568
--------------- --------------- ---------------
Investments 25,237 5,732 4,982
--------------- --------------- ---------------
Property, plant and equipment
Cost 388,424 362,875 333,943
Less - accumulated depreciation 180,652 171,482 148,920
--------------- --------------- ---------------
207,772 191,393 185,023
--------------- --------------- ---------------
Software development costs, net 26,117 18,959 13,559
--------------- --------------- ---------------
Other assets 213,819 151,039 149,143
--------------- --------------- ---------------
--------------- --------------- ---------------
Total assets 1,724,405 1,574,676 1,657,266
=============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
ECI Telecom Ltd.
Interim Consolidated Balance Sheets
----------------------------------------------------------------------------------------------------------------------------------
September 30, September 30, December 31,
2000 1999 1999
(Unaudited) (Unaudited) (Audited)
-------------- -------------- --------------
$ in thousands $ in thousands $ in thousands
-------------- -------------- --------------
Liabilities and shareholders' equity
<S> <C> <C> <C>
Current liabilities
Short-term credits and current
maturities of long-term debt 1,293 59 137
Trade payables 143,564 93,146 115,382
Other payables and accrued liabilities 174,617 172,347 170,804
Proposed dividend 4,639 4,540 4,505
Net balance of discontinuing operations - - 1,011
-------------- -------------- --------------
Total current liabilities 324,113 270,092 291,839
-------------- -------------- --------------
Long-term liabilities
Convertible notes - 85,000 85,000
Other liabilities 18,551 7,423 7,770
Liability for employee severance benefits - net 23,477 24,106 24,559
Total long-term liabilities 42,028 116,529 117,329
-------------- -------------- --------------
Total liabilities 366,141 386,621 409,168
-------------- -------------- --------------
Minority Interest 25,790 8,825 23,778
-------------- -------------- --------------
Shareholders' equity
Share capital 5,873 5,761 5,762
Capital surplus 680,225 587,644 587,639
Accumulated other
comprehensive income 6,460 - 11,171
Retained earnings 760,236 639,642 691,188
-------------- -------------- --------------
1,452,794 1,233,047 1,295,760
Treasury stock (120,320) (53,817) (71,440)
-------------- -------------- --------------
Total shareholders' equity 1,332,474 1,179,230 1,224,320
-------------- -------------- --------------
--------------- --------------- ---------------
Total Liabilities and shareholders' equity 1,724,405 1,574,676 1,657,266
=============== =============== ===============
</TABLE>
March 31, 2000 and December 31, 1999 figures were reclassified to present
discontinuing operations in a separate item line as required by GAAP.
___________________________ President, Chief Executive Officer
Doron Inbar
___________________________ Senior Vice President and
Avi Ben Assayag Chief Financial Officer
Petah Tikva, November 7, 2000
<PAGE>
<TABLE>
<CAPTION>
ECI Telecom Ltd.
Interim Consolidated Statements of Income
------------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended Year Ended Six Months Ended
----------------------------- ----------------------------- -------------- -----------------------------
September 30, September 30, September 30, September 30, December 31, June 30, June 30,
2000 1999 2000 1999 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited) (Unaudited)
-------------- -------------- -------------- -------------- -------------- -------------- --------------
$ in thousands $ in thousands $ in thousands $ in thousands $ in thousands $ in thousands $ in thousands
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues 932,687 826,963 327,217 285,687 1,114,595 605,470 541,276
Cost of revenues 508,331 380,769 182,983 132,891 519,735 325,348 247,878
-------------- -------------- -------------- ----------- -------------- -------------- -------------
Gross profit 424,356 446,194 144,234 152,796 594,860 280,122 293,398
Research and development
costs - net 108,358 90,675 40,664 29,579 125,147 67,694 61,096
Selling and marketing
expenses 171,009 131,653 62,004 46,651 180,413 109,005 85,002
General and administrative
expenses 57,053 46,719 21,127 15,681 64,022 35,926 31,038
Amortization of acquisition-
related intangible assets 15,337 12,159 6,434 3,994 16,294 8,903 8,165
Restructuring and spin-off
expenses 1,979 14,947 1,979 - 14,947 - 14,947
Purchase of in-process
research and development 28,770 87,327 - - 87,327 28,770 87,327
-------------- -------------- -------------- ----------- -------------- -------------- -------------
Operating income 41,850 62,714 12,026 56,891 106,710 29,824 5,823
Financial expenses (7,684) (6,715) (3,164) (1,554) (9,622) (4,520) (5,161)
Financial income 20,076 19,164 6,797 5,065 28,375 13,279 14,099
Other income (expenses) - net 30,858 358 (746) 1,190 50,892 31,604 (832)
-------------- -------------- -------------- ----------- -------------- -------------- -------------
Income from continuing
operations before taxes on
income 85,100 75,521 14,913 61,592 176,355 70,187 13,929
Taxes on income 5,383 5,050 1,646 2,217 7,109 3,737 2,833
-------------- -------------- -------------- ----------- -------------- -------------- -------------
Income from continuing
operations after taxes on
income 79,717 70,471 13,267 59,375 169,246 66,450 11,096
Company's equity in results
of investee companies - net 3,938 (1,887) 2,160 (726) (2,022) 1,778 (1,161)
Minority interest in results
of subsidiaries - net (773) (1,857) (849) (1,175) (1,703) 76 (682)
-------------- -------------- -------------- ----------- -------------- -------------- -------------
Income from continuing
operations 82,882 66,727 14,578 57,474 165,521 68,304 9,253
Discontinuing Operations:
Loss on discontinuing
operations, net of tax - (20,235) - (2,468) (25,593) - (17,767)
loss on disposal of
discontinuing operations,
net of tax - - - - (37,409) - -
-------------- -------------- -------------- ----------- -------------- -------------- -------------
Net income 82,882 46,492 14,578 55,006 102,519 68,304 (8,514)
============== ============== ============== =========== ============== ============== =============
Basic earnings per share
Continuing operations 0.90 0.73 0.16 0.63 1.82 0.75 0.10
Discontinuing operations - (0.22) - (0.03) (0.70) - 0.00
-------------- -------------- -------------- ----------- -------------- -------------- -------------
0.90 0.51 0.16 0.60 1.12 0.75 0.10
============== ============== ============== =========== ============== ============== =============
Weighted average number of
shares outstanding used to
compute basic earnings per
share - in thousands 91,690 91,432 92,129 91,368 91,148 91,468 91,463
============== ============== ============== =========== ============== ============== =============
Diluted earnings per share
Continuing operations 0.89 0.73 0.16 0.61 1.77 0.73 0.12
Discontinuing operations - (0.22) - (0.02) (0.66) - (0.18)
-------------- -------------- -------------- ----------- -------------- -------------- -------------
0.89 0.51 0.16 0.59 1.11 0.73 -0.07
============== ============== ============== =========== ============== ============== =============
Weighted average number of
shares outstanding used to
compute diluted earnings
per share - in thousands 94,088 95,985 94,188 95,338 95,507 94,075 96,337
============== ============== ============== =========== ============== ============== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ECI Telecom Ltd.
Interim Consolidated Statement of Comprehensive Income
----------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended Year Ended
------------------------------ ------------------------------- ---------------
September 30, September 30, September 30, September 30, December 31,
2000 1999 2000 1999 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
-------------- -------------- -------------- -------------- ---------------
$ in thousands $ in thousands $ in thousands $ in thousands $ in thousands
<S> <C> <C> <C> <C> <C>
Net income 82,882 46,492 14,578 55,006 102,519
Other comprehensive income
Realization of gain on available
for sale securities (14,856) (648) (3,685) - (648)
Unrealized holding gain on
securities arising during the period 10,145 - 1,508 - 11,171
-------------- -------------- -------------- -------------- --------------
Total other comprehensive income (4,711) (648) (2,177) - 10,523
-------------- -------------- -------------- -------------- --------------
Comprehensive income 78,171 45,844 12,401 55,006 113,042
============== ============== ============== ============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ECI Telecom Ltd.
Interim Consolidated Statements of Changes in Shareholders' Equity
-----------------------------------------------------------------------------------------------------------------------------------
$ in thousands except share amounts
Number Share Capital Accumulated Retained Treasury Total
of capital surplus other earnings stock share-
Shares comprehensive holders'
income equity
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 2000 (Unaudited) 92,058,614 5,869 677,161 8,637 750,379 (119,720) 1,322,326
Unaudited
Net income for the three months ended
September 30, 2000 14,578 14,578
Employee stock options exercised and paid, net 108,216 4 2,424 2,428
Amortization of deferred compensation expenses 640 640
Net unrealized gain on available for sale securities 1,508 1,508
Realization of gain on available for sale securities (3,685) (3,685)
Acquisition of the Company's stock (20,000) (600) (600)
Dividend (4,721) (4,721)
-----------------------------------------------------------------------------------
Balance at September 30, 2000 92,146,830 5,873 680,225 6,460 760,236 (120,320) 1,332,474
===================================================================================
Balance at July 1, 1999 (Unaudited) 91,795,201 5,759 584,907 589,175 (21,650) 1,158,191
Unaudited
Net income for the three months ended
September 30, 1999 55,006 55,006
Employee stock options exercised and paid, net 65,550 2 1,027 1,029
Amortization of deferred compensation expenses 1,710 1,710
Acquisition of the Company's stock (1,069,600) (32,167) (32,167)
Dividend (4,539) (4,539)
-----------------------------------------------------------------------------------
Balance at September 30, 1999 90,791,151 5,761 587,644 639,642 (53,817) 1,179,230
===================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ECI Telecom Ltd.
Consolidated Statements of Changes in Shareholders' Equity
------------------------------------------------------------------------------------------------------------------------------------
$ in thousands except share amounts
Number Share Capital Accumulated Retained Treasury Total
of capital surplus other earnings stock share-
Shares comprehensive holders'
income equity
-------------------------------------------------------------------------------
Audited
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 76,960,419 5,317 156,559 648 606,890 (6,322) 763,092
Net income for the year ended
December 31, 1999 102,519 102,519
Employee stock options exercised and paid, net 815,102 24 18,028 18,052
Share Issuance 13,966,480 403 394,379 394,782
Conversion of convertible note into share capital 600,000 18 14,982 15,000
Amortization of deferred compensation expenses 3,691 3,691
Net unrealized gain on available for sale securities 11,171 11,171
Realization of gain on available for sale securities (648) (648)
Acquisition of Company's stock by a subsidiary (2,240,000) (65,118) (65,118)
Dividend (18,221) (18,221)
-------------------------------------------------------------------------------
Balance at January 1, 2000 90,102,001 5,762 587,639 11,171 691,188 (71,440) 1,224,320
Unaudited
Net income for the nine months ended
September 30, 2000 82,882 82,882
Employee stock options exercised and paid, net 316,056 10 6,279 6,289
Conversion of convertible note into share capital 3,400,000 101 84,049 84,150
Amortization of deferred compensation expenses 2,258 2,258
Net unrealized gain on available for sale securities 10,145 10,145
Realization of gain on available for sale securities (14,856) (14,856)
Acquisition of the Company's stock (1,671,227) (48,880) (48,880)
Dividend (13,834) (13,834)
-------------------------------------------------------------------------------
Balance at September 30, 2000 92,146,830 5,873 680,225 6,460 760,236 (120,320) 1,332,474
===============================================================================
Balance at January 1, 1999 (audited) 76,960,419 5,317 156,559 648 606,890 (6,322) 763,092
Unaudited
Net income for the nine months ended
September 30, 1999 46,492 46,492
Employee stock options exercised and paid, net 794,252 23 17,674 17,697
Share Issuance 13,966,480 403 394,379 394,782
Conversion of convertible note into share capital 600,000 18 14,982 15,000
Amortization of deferred compensation expenses 4,050 4,050
Realization of gain on available for sale securities (648) (648)
Acquisition of the Company's stock (1,530,000) (47,495) (47,495)
Dividend (13,740) (13,740)
-------------------------------------------------------------------------------
Balance at September 30, 1999 90,791,151 5,761 587,644 639,642 (53,817) 1,179,230
===============================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ECI Telecom Ltd.
Interim Consolidated Statements of Cash Flows (Cont'd)
-----------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended Year Ended Six Months Ended
----------------------------- ----------------------------- -------------- ----------------------------
September 30, September 30, September 30, September 30, December 31, June 30, June 30,
2000 1999 2000 1999 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited) (Unaudited)
-------------- -------------- -------------- -------------- -------------- -------------- -------------
$ in thousands $ in thousands $ in thousands $ in thousands $ in thousands $ in thousands $ in thousands
<S> <C> <C> <C> <C> <C> <C> <C>
A. Acquisition of newly
consolidated subsidiaries
Working capital (other than
cash) 13,189 (257,431) - 422 (256,937) 13,189 (257,853)
Long-term receivables, net
of current maturities - (10,284) - - (10,284) - (10,284)
Investment in investee
companies - 171,590 - - 171,923 - 171,590
Property, plant and equipment
- net (2,617) (52,064) - 700 (52,114) (2,617) (52,764)
Other assets (mainly deferred
taxes) - (2,431) - 2,000 (2,431) - (4,431)
Goodwill (80,801) (144,516) - (5,200) (144,646) (80,801) (139,316)
In-process research and
development (28,770) (87,327) - - (87,327) (28,770) (87,327)
Long-term liabilities - 31,996 - 2,078 31,996 - 29,918
Minority Interest - 2,076 - - 2,076 - 2,076
Share Issuance - 394,782 - - 394,782 - 394,782
-------------- -------------- -------------- -------------- -------------- -------------- -------------
(98,999) 46,391 - - 47,038 (98,999) 46,391
============== ============== ============== ============== ============== ============== =============
B. Non-cash activities
Conversion of convertible
note into share capital 85,000 15,000 - - 15,000 85,000 15,000
Conversion of convertible
debentures into share
capital of an investee
company - 177,000 - - 177,000 - 177,000
Sale of production activity
on credit - - - - 16,689 - -
Sale of investment in
investee company for
available for sale
securities - - - - 29,266 - -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ECI Telecom Ltd.
Interim Consolidated Statements of Cash Flows
-----------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended Year Ended Six Months Ended
----------------------------- ----------------------------- -------------- ----------------------------
September 30, September 30, September 30, September 30, December 31, June 30, June 30,
2000 1999 2000 1999 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited) (Unaudited)
-------------- -------------- -------------- -------------- -------------- -------------- -------------
$ in thousands $ in thousands $ in thousands $ in thousands $ in thousands $ in thousands $ in thousands
Cash flows from operating
activities
<S> <C> <C> <C> <C> <C> <C> <C>
Net income 82,882 46,492 14,578 55,006 102,519 68,304 (8,514)
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation and amortization 58,611 66,277 21,453 19,957 91,122 37,158 46,320
Loss (gain) on sale of
property and equipment (147) (150) (72) (63) 162 (75) (87)
Capital Gains, net (32,680) - 868 - (52,383) (33,548) -
Other, net (mainly long-term
deferred taxes) (66) 2,199 435 (675) 2,777 (501) 2,874
In-process research and
development costs 28,770 87,327 - - 87,327 28,770 87,327
Company's equity in results
of investee companies (3,938) 2,243 (2,160) 726 2,378 (1,778) 1,517
Minority interest in net
results of a subsidiaries 773 1,857 849 1,175 1,703 (76) 682
Decrease in marketable
securities 23,885 2,656 56,304 2,211 8,826 (32,419) 445
Increase in trade receivables
(including non-current
maturities of bank deposits
and trade receivables) (159,597) (156,413) (54,964) (59,714) (124,028) (104,633) (96,699)
Decrease (increase) in other
receivables 11,801 (13,260) 5,580 (15,612) (28,264) 6,221 2,352
Increase in prepaid expenses (5,450) (3,336) (4,022) (518) (2,321) (1,428) (2,818)
Increase in recoverable
costs and estimated
earnings, not yet billed (5,610) (12,985) (2,025) (2,368) (4,026) (3,585) (10,617)
Decrease (increase) in
inventories (97,645) 31,520 (54,388) 9,691 23,125 (43,257) 21,829
Change in net balance of
discontinuing operations (1,689) - 2,747 - - (4,436) -
Increase in trade payables 26,628 8,814 6,258 15,042 33,825 20,370 (6,228)
Decrease in other payables
and accrued liabilities (15,338) (31,991) (5,368) (14,114) (5,394) (9,970) (17,877)
Increase (decrease) in other
long-term liabilities 10,581 (3,339) 3,567 (2,793) (856) 7,014 (546)
Increase (decrease) in
liability for employee
severance benefits (1,227) 2,427 3,288 (589) 1,196 (4,515) 3,016
------------ ------------ ------------ ------------ ------------ ------------ -----------
Net cash provided by (used
in) operating activities (79,456) 30,338 (7,072) 7,362 137,688 (72,384) 22,976
------------ ------------ ------------ ------------ ------------ ------------ -----------
Cash flows from investing
activities
Decrease (increase) in
short-term investments 115,984 161,033 53,880 (6,924) 123,911 62,104 167,957
Software development costs
capitalized (20,168) (10,187) (7,658) (4,970) (15,444) (12,510) (5,217)
Investment in property,
plant and equipment (52,236) (42,279) (20,634) (14,591) (54,375) (31,602) (27,688)
Proceeds from sale of
property, plant and equipment 1,641 1,771 1,216 1,270 1,365 425 501
Purchase of technology (501) (1,000) - - (1,000) (501) (1,000)
Payment with respect of
other assets - (6,888) - (2,527) (7,252) - (4,361)
Acquisition of investee
companies (12,504) 52 (1,672) - (500) (10,832) 52
Proceeds from sale of
available for sale securities 65,125 1,905 - - 1,905 65,125 1,905
Proceeds from sale of shares
of an investee company 2,045 - - - - 2,045 -
Long term loans granted to
investee companies (476) (2,400) (187) (250) (4,850) (289) (2,150)
Acquisition of additional
rights in consolidated
subsidiary - (12,500) - - (12,500) - (12,500)
Acquisition of newly
consolidated subsidiaries (A) (98,999) 46,391 - - 47,038 (98,999) 46,391
Repayment of due from
related party - 25,000 - - 25,000 - 25,000
Proceeds from sale of
production activity 17,099 - - - - 17,099 -
------------ ------------ ------------ ------------ ------------ ------------ -----------
Net cash provided by
(used in) investing
activities 17,010 160,898 24,945 (27,992) 103,298 (7,935) 188,890
------------ ------------ ------------ ------------ ------------ ------------ -----------
Cash flows from financing
activities
Exercise of employee stock
options (net of share issue
expenses) 6,289 17,697 2,428 1,029 18,052 3,861 16,668
Exercise of employee stock
options in a subsidiary
(net of share issue expenses) 233 - 233 - -
Repayment of long-term debt - (5,779) - - (5,779) - (5,779)
Increase (decrease) in
short-term credit, net 1,004 (123,626) (159) (8) (122,707) 1,163 (123,618)
Net proceeds from IPO in a
subsidiary - - - - 43,199 - -
Acquisition of the Company's
stock (48,880) (47,495) (600) (32,167) (65,118) (48,280) (15,328)
Share issue expenses (850) - - - - (850) -
Dividend paid (13,731) (13,048) (4,717) (4,589) (17,564) (9,014) (8,459)
------------ ------------ ------------ ------------ ------------ ------------ -----------
Net cash used in financing
activities (55,935) (172,251) (2,815) (35,735) (149,917) (53,120) (136,516)
------------ ------------ ------------ ------------ ------------ ------------ -----------
Effect of change in exchange
rate on cash 504 (857) 593 237 (773) (89) (1,094)
------------ ------------ ------------ ------------ ------------ ------------ -----------
Net increase (decrease) in
cash and cash equivalents (117,877) 18,128 15,651 (56,128) 90,296 (133,528) 74,256
Cash and cash equivalents at
beginning of period 232,144 141,848 98,616 216,104 141,848 232,144 141,848
------------ ------------ ------------ ------------ ------------ ------------ -----------
Cash and cash equivalents at
end of period 114,267 159,976 114,267 159,976 232,144 98,616 216,104
============ ============ ============ ============ ============ ============ ===========
* Reclassified
</TABLE>
<PAGE>
ECI Telecom Ltd.
Condensed Notes to the Interim Consolidated Financial Statements
--------------------------------------------------------------------------------
(Unaudited)
Note 1 - General
These are interim consolidated financial statements, in a condensed format,
as of September 30, 2000 and for the nine and three months period then
ended. These interim consolidated financial statements should be read in
conjunction with Company's annual consolidated financial statements as of
December 31, 1999 and their accompanying notes.
Note 2 - Significant Accounting Policies
A. The accounting policies applied in the preparation of these interim
consolidated financial statements are identical with those applied in
the preparation of the latest annual consolidated financial
statements.
B. The interim consolidated financial statements are prepared according
to the accounting policies for preparation of financial statements for
interim periods.
Note 3 - Financial Statements Denominated in U.S. Dollars
The interim consolidated financial statements have been prepared on the
basis of historical cost convention and denominated in U.S. dollars
amounts.
Note 4 - Acquisition of newly consolidated subsidiaries
A. In April 2000, ECI and subsidiary, purchased WavePacer, Pulse
Communications Inc.'s Digital Subscriber Line (DSL) business unit, for
an initial cash consideration of $62.7 million. The aforesaid purchase
price could increase by up to additional $25 million, provided certain
sales targets are met in 2000. The excess of the purchase price over
the fair value of the net tangible assets amounted to $59 million, of
which $20.5 million relates to in-process research and development,
which has been written off to the statement of income.
B. In June 2000, a wholly-owned subsidiary purchased for $40.5 million,
all the rights in WinNeT Metropolitan Communications Systems Inc., an
emerging broadband wireless communications company, located in the
Silicon Valley in California. In addition, should certain sales
thresholds and R&D targets be reached during 2000, the said purchase
price may rise by a further $20 million. The excess of the purchase
price over the fair value of the net tangible assets amounted to $50.8
million, of which $8.3 million relates to in-process research and
development, which has been written off to the statement of income.
ECI Telecom Ltd.
Note 5 - Supplementary Information
A. The Company's Board of Directors approved Management's recommendation
that the Company be split up into five additional companies which will
engage in different activities, as follows: Access, Transport, Optical
Networks, Next Generation Telephony Solutions and Innowave
Implementation of the split up is subject to receipt of various
approvals where necessary in accordance with law, including approvals
of the Income Tax Authorities, the Company's shareholders and the
court, as well as the readiness and preparedness of the different
activities targeted for separation.
B. The company is continuing the process of disposing the Business System
Division (BSD) to some buyers.
Note 6 - Recently Relevant Enacted Accounting Standarts
A. In December 1999, the Staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin 101, "Revenue Recognition in
Financial Statements" ("SAB 101"), which provides guidance related to
revenue recognition. SAB 101 allows companies to report any changes in
revenue recognition related to the adoption of its provisions as an
accounting change at the time of implementation. The company must
adopt SAB 101 no later than December 31, 2000, effective as of January
1, 2000. The company is currently determining the impact that this
statement will have on its business, results of operations and
financial condition.
B. In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). In June 2000, the FASB issued SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities - an
amendment of SFAS No.133" ("SFAS 138"), which amends certain
provisions of SFAS 133. The amendment included expanding the normal
purchase and sale exemption for supply contracts, permitting the
offsetting of certain intercompany foreign currency derivatives and
thus reducing the number of third party derivatives, permitting hedge
accounting for foreign currency denominated assets and liabilities,
and redefining interest rate risk to reduce sources of
ineffectiveness. The company management estimated that the
implementation of this standard will not have a material effect on
their financial statements.
C. In September 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" ("FASB 140") which is effective for periods beginning
after December 15, 2000 for certain provisions and transfers and
servicing of financial assets and extinguishment of liabilities
occurring after March 31, 2001. This statement reconsidered and
clarified certain provisions of and supercades Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Finanical Assets and Extinguishment of Liabilities." The Company
does not expect the adoption of FAS 140 to have a material impact on
the Company's results of operations, financial position or cash flows.
Note 7 - Differences Between Israeli GAAP and US GAAP
The differences between measurement according to US GAAP and Israeli GAAP
as they are reflected in these financial statements are as follows :
A. According to US GAAP, marketable securities that are defined as
"available for sale" are stated at market value. An increase in their
value is presented as a separate item in shareholders' equity.
According to Israeli GAAP, marketable securities that are defined as a
"current investment" are stated at market value and an increase in
their value is recognized in statement of income on a current basis.
Securities that are not so defined are stated at cost.
B. According to US GAAP, deferred taxes are not created in respect of
differences arising as a result of the difference between the rate of
change in the Consumer Price Index (which is the basis for measuring
results for tax purposes) and the rate of change in the exchange rate
of the dollar versus the shekel. According to Israeli GAAP deferred
taxes are created in respect of this difference.
<TABLE>
<CAPTION>
September 30,2000 September 30,1999 December 31,1999
-------------------------------------- -------------------------------------- --------------------------------------
According to According to According to
As reported Adjustment Israeli GAAP As reported Adjustment Israeli GAAP As reported Adjustment Israeli GAAP
$ thousands $ thousands $ thousands $ thousands $ thousands $ thousands $ thousands $ thousands $ thousands
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited) (Audited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Other asses 213,819 2,000 215,819 151,039 - 151,039 149,143 2000 151,143
Accumulated
other
comprehensive
income 6,460 (6,460) - - - - 11,171 (11,171) -
Shareholders'
equity 1,332,474 2,000 1,334,474 1,179,230 - 1,179,230 1,224,320 2000 1,226,320
</TABLE>
<TABLE>
<CAPTION>
Nine months ended September 30, 2000 Nine months ended September 30,1999 Year ended December 31,1999
-------------------------------------- -------------------------------------- --------------------------------------
According to According to According to
As reported Adjustment Israeli GAAP As reported Adjustment Israeli GAAP As reported Adjustment Israeli GAAP
$ thousands $ thousands $ thousands $ thousands $ thousands $ thousands $ thousands $ thousands $ thousands
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) (Audited) (Audited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Financial income 20,076 10,094 30,170 19,164 - 19,164 28,375 - 28,375
Other income
(expenses) 30,858 (11,171) 19,687 358 - 358 50,892 11,171 62,063
Taxes on income 5,383 3,634 9,017 5,050 - 5,050 7,109 (2,000) 5,109
Net income (loss) 82,882 (4,711) 78,171 46,492 - 46,492 102,519 13,171 115,690
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three months ended September 30,2000 Three months ended September 30,1999
--------------------------------------- --------------------------------------
According to According to
As reported Adjustment Israeli GAAP As reported Adjustment Israeli GAAP
$ thousands $ thousands $ thousands $ thousands $ thousands $ thousands
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Financial income 6,797 (3,401) 3,396 5,065 - 5,065
Taxes on income 1,646 (1,424) 222 2,217 - 2,217
Net income 14,578 (1,977) 12,601 55,006 - 55,006
</TABLE>
