SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
or
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to __________
or
☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report _________
Commission file number: 0-21218
GILAT SATELLITE NETWORKS LTD.
(Exact name of Registrant as specified in its charter)
ISRAEL
(Jurisdiction of incorporation or organization)
Gilat House, 21 Yegia Kapayim Street, Kiryat Arye, Petah Tikva, 4913020Israel
(Address of principal executive offices)
Yael Shofar, Adv.
General Counsel
Gilat Satellite Networks Ltd.
Gilat House, 21 Yegia Kapayim Street,
Kiryat Arye, Petah Tikva, 4913020 Israel
Tel: +9723 929 3020
Fax: +972 3 925 2945
(Name, telephone, e-mail and/or facsimile number and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Ordinary Shares, NIS 0.20 nominal value | GILT | NASDAQ Global Select Market |
Securities registered or to be registered pursuant of Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
NoneIndicate the number of outstanding shares of each of the issuer’s classes of capital or common stock at the close of the period covered by the annual report:
56,539,237 Ordinary Shares, NIS 0.20 nominal value per share
(as of December 31, 2018)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated file, a non-accelerated filer, or an emerging growth company. See the definitions of “accelerated filer,” “large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer ☐ | Accelerated filer ☒ | |
Non-accelerated filer ☐ | Emerging growth company ☐ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☒ | U.S. GAAP | ☐ | International Financial Reporting Standards as issued by the International Accounting Standards Board | ☐ | Other |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
This report on Form 20-F is being incorporated by reference into our Registration Statements on Form F-3 (Registration No. 333-232597) and on Form S-8 (Registration Nos., 333-180552, 333-187021, 333-204867, 333-210820, 333-217022, 333-221546, 333-223839, 333-231442, 333-236028. 333-253972 and 333-223839)333-255740).
◾ | Managed satellite network services solutions, including services over our own networks (which may include satellite capacity); |
◾ | Network planning and optimization; |
◾ | Remote network operation; |
◾ | Call center support; |
◾ | Hub and field operations; and |
◾ | Construction and installation of communication networks, typically on a Build, Operate and Transfer, or BOT, or Build, Operate and Own, or BOO, contract basis. |
• | Fixed Networks provides advanced fixed broadband satellite communication networks, satellite communication systems and associated professional services and comprehensive turnkey solutions (which may include in certain instances managed satellite network services). Our customers are service providers, satellite operators, MNOs, telecommunication companies, or Telcos, and |
• | Mobility Solutions provides advanced on-the-move satellite communications equipment, systems, and solutions, including airborne, maritime, gateways and ground-mobile satellite systems and solutions. This segment provides solutions for land, sea and air connectivity, focusing on the high-growth IFC market, with our unique leading technology as well as defense and homeland security activities. Our product portfolio includes a leading network platform with high-speed VSATs, high performance on-the-move antennas and high efficiency, high power SSPAs, BUCs and transceivers. Our customers are satellite operators, service providers, system integrators, defense and homeland security organizations, as well as other commercial entities worldwide. |
• | Terrestrial Infrastructure Projects provides fiber and wireless network infrastructure construction of the Programa Nacional de Telecomunicaciones (Pronatel), or PRONATEL, in Peru. |
• | Satellite Networks is focused on the development and supply of networks that are used as the platform that enables the latest satellite constellations of HTS, VHTS and NGSO opportunities worldwide. We provide advanced broadband satellite communication networks and associated professional services and comprehensive turnkey solutions and managed satellite network services solutions. Our customers are service providers, satellite operators, |
Integrated Solutions |
1 | ||||
1 | ||||
1 | ||||
1 | ||||
A. | Reserved | 1 | ||
B. | Capitalization and Indebtedness | |||
C. | Reasons for the Offer and Use of Proceeds | |||
D. | Risk Factors | |||
INFORMATION ON THE COMPANY | ||||
A. | History and Development of the Company | |||
B. | Business Overview | |||
C. | Organizational Structure | |||
D. | Property, Plants and Equipment | |||
A. | Operating Results | |||
B. | Liquidity and Capital Resources | |||
C. | Research and Development | |||
D. | Trend Information | |||
E. | ||||
A. | Directors and Senior Management | |||
B. | Compensation of Directors and Officers | |||
C. | Board Practices | |||
D. | Employees | |||
E. | Share Ownership | |||
A. | Major Shareholders | |||
B. | Related Party | |||
C. | Interests of Experts and | |||
A. | Offer and Listing Details | |||
B. | Plan of Distribution | |||
C. | Markets | |||
D. | Selling Shareholders | |||
E. | Dilution | |||
F. | Expense of the Issue | |||
A. | Share Capital | |||
B. | Memorandum and Articles of Association | |||
C. | Material Contracts | |||
D. | Exchange Controls | |||
E. | Taxation | |||
F. | Dividend and Paying Agents | |||
G. | Statement by Experts | |||
H. | Documents on Display | |||
I. | Subsidiary Information | |||
PRINCIPAL ACCOUNTANT FEES AND SERVICES | ||||
115 | ||||
ITEM 3: | KEY INFORMATION |
A. |
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
U.S. dollars in thousands, except for share data | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Products | 173,966 | 214,522 | 214,291 | 128,970 | 157,531 | |||||||||||||||
Services | 92,425 | 68,234 | 65,260 | 68,573 | 77,602 | |||||||||||||||
Total | 266,391 | 282,756 | 279,551 | 197,543 | 235,133 | |||||||||||||||
Cost of revenues: | ||||||||||||||||||||
Products | 121,147 | 153,167 | 162,563 | 94,683 | 106,905 | |||||||||||||||
Services | 51,207 | 47,094 | 41,498 | 48,635 | 44,593 | |||||||||||||||
Impairment of long lived assets | - | - | - | 10,137 | - | |||||||||||||||
Total Cost of revenues | 172,354 | 200,261 | 204,061 | 153,455 | 151,498 | |||||||||||||||
Gross profit | 94,037 | 82,495 | 75,490 | 44,088 | 83,635 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development, net | 33,023 | 28,014 | 24,853 | 22,412 | 25,158 | |||||||||||||||
Selling and marketing | 22,706 | 23,759 | 23,411 | 24,823 | 32,537 | |||||||||||||||
General and administrative | 17,024 | 19,861 | 26,471 | 18,644 | 20,903 | |||||||||||||||
Restructuring costs | - | - | - | 1,508 | - | |||||||||||||||
Goodwill impairment | - | - | - | 20,402 | - | |||||||||||||||
Total Operating expenses | 72,753 | 71,634 | 74,735 | 87,789 | 78,598 | |||||||||||||||
Operating income (loss) | 21,284 | 10,861 | 755 | (43,701 | ) | 5,037 | ||||||||||||||
Financial expenses, net | 4,298 | 4,307 | 4,843 | 7,243 | 3,837 | |||||||||||||||
Income (loss) before taxes on income | 16,986 | 6,554 | (4,088 | ) | (50,944 | ) | 1,200 | |||||||||||||
Taxes on income (tax benefit) | (1,423 | ) | (247 | ) | 1,252 | 1,190 | 1,901 | |||||||||||||
Net income (loss) from continuing operations | 18,409 | 6,801 | (5,340 | ) | (52,134 | ) | (701 | ) | ||||||||||||
Loss from discontinued operations (1) | - | - | - | (200 | ) | (795 | ) | |||||||||||||
Net income (loss) | 18,409 | 6,801 | (5,340 | ) | (52,334 | ) | (1,496 | ) | ||||||||||||
Net income (loss) per share (basic) from continuing operations (2) | 0.34 | 0.12 | (0.10 | ) | (1.16 | ) | (0.02 | ) | ||||||||||||
Net income (loss) per share (diluted) from continuing operations (2) | 0.33 | 0.12 | (0.10 | ) | (1.16 | ) | (0.02 | ) | ||||||||||||
Loss per share (basic and diluted) from discontinued operations (2) | - | - | - | - | (0.02 | ) | ||||||||||||||
Net income (loss) per share (basic) (2) | 0.34 | 0.12 | (0.10 | ) | (1.16 | ) | (0.04 | ) | ||||||||||||
Net income (loss) per share (diluted) (2) | 0.33 | 0.12 | (0.10 | ) | (1.16 | ) | (0.04 | ) |
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
U.S. dollars in thousands | ||||||||||||||||||||
Working capital | 105,765 | 92,035 | 92,609 | 60,529 | 66,588 | |||||||||||||||
Total assets | 394,747 | 391,556 | 383,198 | 370,833 | 364,908 | |||||||||||||||
Short‑term bank credit and loans and current maturities | 4,458 | 4,479 | 4,617 | 11,542 | 20,452 | |||||||||||||||
Long term loan, net of current maturities | 8,098 | 12,582 | 16,932 | 21,493 | 26,271 | |||||||||||||||
Other long-term liabilities | 7,229 | 9,007 | 9,766 | 11,484 | 13,336 | |||||||||||||||
Shareholders’ equity | 239,072 | 218,322 | 209,826 | 178,082 | 225,139 |
B. | Capitalization and Indebtedness |
C. | Reasons for the Offer and Use of Proceeds |
D. | Risk Factors |
• | Tax authorities may disagree with our provisions and payments related to income taxes, deduction of withholding taxes, intercompany charges, cross-jurisdictional transfer pricing or other matters which could result in our being assessed additional taxes. |
there is a change in government procurement procedures or conditions of remuneration; or |
A. | History and Development of the Company |
B. | Business Overview |
• | Fixed Networks provides advanced fixed broadband satellite communication networks, satellite communication systems and associated professional services and comprehensive turnkey solutions (which may include in certain instances managed satellite network services). Our customers are service providers, satellite operators, MNOs, or Telcos, and |
• | Mobility Solutions provides advanced on-the-move satellite communications equipment, systems, and solutions, including airborne, maritime, gateways and ground-mobile satellite systems and solutions. This segment provides solutions for land, sea and air connectivity, focusing on the high-growth IFC market, with our unique leading technology as well as defense and homeland security activities. Our product portfolio comprises of a leading network platform with high-speed VSATs, high performance on-the-move antennas and high efficiency, high power SSPAs, BUCs and transceivers. Our customers are satellite operators, service providers, system integrators, defense and homeland security organizations, as well as other commercial entities worldwide. |
• | Terrestrial Infrastructure Projects provides fiber and wireless network infrastructure construction of the Programa Nacional de Telecomunicaciones (Pronatel), or PRONATEL, in Peru. |
• | Satellite Networks is focused on the development and supply of networks that are used as the platform that enables the latest satellite constellations of HTS, VHTS and NGSO opportunities worldwide. We provide advanced broadband satellite communication networks and associated professional services and comprehensive turnkey solutions and managed satellite network services solutions. Our customers are service providers, satellite operators, MNOs, Telcos, |
Integrated Solutions |
• | Network Infrastructure and Services is focused on telecom operation and implementation of large-scale networks projects in Peru. We provide terrestrial (fiber optic and wireless network) and satellite network construction and operation. We serve our customers through technology integration, managed networks and services, connectivity services, internet access and telephony over our own networks. We implement projects using various technologies (including our equipment), mainly based on BOT and BOO contracts. |
o | Modem – This is the device that modulates the digital data into an analog RF signal for delivery to the upconverter, and demodulates the analog signals from the downconverter back into digital data. The modem, which is typically located indoors, performs data processing functions such as traffic management and prioritization and provides the digital interfaces (Ethernet port/s) for connecting to the user’s equipment (PC, switch, etc.). |
o | Amplifiers and BUCs – These are the components that connect the ground station equipment with the antenna. The purpose of the amplifiers and BUCs is to amplify the power and convert the frequency of the transmitted RF signal. |
o | Antenna – Antennas can vary quite significantly in size, power and complexity depending on the ground equipment they are connected to, and their application. For example, antennas connected to remote sites generally are in the range of one meter in diameter while those connected to the central hub system can be in the range of ten meters in diameter. Antennas used on moving platforms need to be compact and have a mechanically or electronically auto-pointing mechanism so that they can remain locked onto the satellite during motion. |
Universal availability – Satellite communications provide service to any location within a satellite footprint. |
Timely implementation – Large satellite communications networks with thousands of remote sites can be deployed within a few weeks. |
Broadcast and multicast capabilities – Satellite is an optimal solution for broadcast and multicast transmission as the satellite signal is simultaneously received by any group of users in the satellite footprint. |
Reliability and service availability – Satellite communications network availability is high due to the satellite and ground equipment reliability, the small number of components in the network and terrestrial infrastructure independence. |
Scalability – Satellite communications networks scale easily from a single site to thousands of locations. |
Cost-effectiveness – The cost of satellite communications networks is independent of distance and therefore it is a cost-effective solution for networks comprised of multiple sites in remote locations. |
Applications delivery – Satellite communications networks offer a wide variety of customer applications such as e‑mail, virtual private networks, video, voice, internet access, distance learning, cellular backhaul and financial transactions. |
Portability and Mobility – Satellite communications solutions can be mounted on moving platforms for communications on the move, or deployed rapidly for communications in fixed locations and then relocated or moved as required. |
RaySat ER7000 maximizes throughput using high-efficiency waveguide panel technology and the antenna’s light weight ensures easy and safe vehicle mounting. It has been widely deployed on trains and large vehicles worldwide. |
Defense Communications - satellite-based airborne and highly secured point-to-point. This market is typically categorized by customers requiring high quality products – at times for mission critical communications in extreme environmental conditions. The satellite terminals (e.g., VSAT, Single Channel Per Carrier, or SCPC) are usually provided to the defense agencies via system integrators and not directly from the power amplifier |
Unmanned Aerial Vehicles - Our BlackRay |
Years Ended December 31, | ||||||||||||||||||||||||
Years Ended December 31, | 2021 | 2020 | 2019 | |||||||||||||||||||||
2018 | 2017 | 2016 | As Restated (1) | |||||||||||||||||||||
Latin America | 36 | % | 47 | % | 51 | % | 33 | % | 35 | % | 29 | % | ||||||||||||
North America | 36 | % | 26 | % | 20 | % | ||||||||||||||||||
U.S. and Canada | 33 | % | 36 | % | 42 | % | ||||||||||||||||||
APAC | 15 | % | 12 | % | 17 | % | 21 | % | 15 | % | 17 | % | ||||||||||||
EMEA | 13 | % | 15 | % | 12 | % | 13 | % | 14 | % | 12 | % | ||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
(1) | We restated our previously issued consolidated financial statements. For additional information, see Note 2 and Note 17 to our audited consolidated financial statements included in Part III, Item 18 to this Annual Report on Form 20-F. |
C. | Organizational Structure |
Country/State | ||
Significant Subsidiaries | % | |
1. Gilat Satellite Networks (Holland) B.V. | Netherlands | 100% |
2. | 100% | |
3. Gilat to Home Peru S.A | Peru | 100% |
4. Gilat do Brazil Ltda. | Brazil | 100% |
5. Gilat Satellite Networks (Mexico) S.A. de C.V. | Mexico | 100% |
6. Wavestream Corporation | Delaware | 100% |
7. Gilat Networks Peru S.A | Peru | 100% |
8. Gilat Satellite Networks Australia Pty Ltd. | Australia | 100% |
9. Gilat Satellite Networks (Eurasia) Limited | Russia | 100% |
10. Gilat Satellite Networks MDC (Moldova) | Moldova | 100% |
11. Raysat Bulgaria EOOD | Bulgaria | 100% |
12. Gilat Satellite Communication Technology (Beijing) Ltd. | China | 100% |
13. Gilat Satellite Networks (Philippines) Inc. | Philippines | 100% |
D. | Property, Plants and Equipment |
ITEM 5: | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
A. | Operating Results |
March 31, 2021 | ||||||||||||
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
U.S. dollars in thousands | ||||||||||||
Account Receivables | $ | 28,975 | $ | - | $ | 28,975 | ||||||
Contract assets | 46,060 | 3,678 | 49,738 | |||||||||
Total current assets | 201,600 | 3,678 | 205,278 | |||||||||
Long-term contract assets | - | 13,400 | 13,400 | |||||||||
Total long-term assets | 159,073 | 13,400 | 172,473 | |||||||||
Total assets | $ | 360,673 | $ | 17,078 | $ | 377,751 |
March 31, 2021 | ||||||||||||
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
U.S. dollars in thousands | ||||||||||||
Accrued expenses | $ | 47,465 | $ | 2,028 | $ | 49,493 | ||||||
Advances from customers and deferred revenues | 35,404 | (6,096 | ) | 29,308 | ||||||||
Total current liabilities | 122,147 | (4,068 | ) | 118,080 | ||||||||
Long-term advances from customers | 307 | 4,440 | 4,747 | |||||||||
Total long-term liabilities | 10,426 | 4,440 | 14,866 | |||||||||
Accumulated deficit | (696,552 | ) | 16,706 | (679,846 | ) | |||||||
Total shareholders' equity | 228,100 | 16,706 | 244,806 | |||||||||
Total liabilities and shareholders' equity | $ | 360,673 | $ | 17,078 | $ | 377,751 |
June 30, 2021 | ||||||||||||
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
U.S. dollars in thousands | ||||||||||||
Account Receivables | $ | 34,152 | $ | 293 | $ | 34,445 | ||||||
Contract assets | 23,830 | 2,463 | 26,293 | |||||||||
Total current assets | 190,942 | 2,756 | 193,698 | |||||||||
Long-term contract assets | - | 12,019 | 12,019 | |||||||||
Total long-term assets | 159,681 | 12,019 | 171,700 | |||||||||
Total assets | $ | 350,624 | $ | 14,775 | $ | 365,399 |
June 30, 2021 | ||||||||||||
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
U.S. dollars in thousands | ||||||||||||
Accrued expenses | $ | 48,359 | $ | - | $ | 48,359 | ||||||
Advances from customers and deferred revenues | 23,881 | (1,191 | ) | 22,690 | ||||||||
Total current liabilities | 108,072 | (1,191 | ) | 106,881 | ||||||||
Long-term advances from customers | 1,180 | 2,360 | 3,540 | |||||||||
Total long-term liabilities | 13,845 | (644 | ) | 13,201 | ||||||||
Accumulated deficit | (696,682 | ) | 16,610 | (680,072 | ) | |||||||
Total shareholders' equity | 228,707 | 16,610 | 245,317 | |||||||||
Total liabilities and shareholders' equity | $ | 350,624 | $ | 14,775 | $ | 365,399 |
September 30, 2021 | ||||||||||||
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
U.S. dollars in thousands | ||||||||||||
Account Receivables | $ | 30,972 | $ | 733 | $ | 31,705 | ||||||
Contract assets | 24,469 | 1,813 | 26,282 | |||||||||
Total current assets | 195,337 | 2,546 | 197,883 | |||||||||
Long-term contract assets | - | 12,343 | 12,343 | |||||||||
Total long-term assets | 156,332 | 12,343 | 168,675 | |||||||||
Total assets | $ | 351,669 | $ | 14,889 | $ | 366,558 |
LIABILITIES AND SHAREHOLDERS' EQUITY |
September 30, 2021 | ||||||||||||
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
U.S. dollars in thousands | ||||||||||||
Accrued expenses | $ | 47,722 | $ | - | $ | 47,722 | ||||||
Advances from customers and deferred revenues | 29,550 | (1,128 | ) | 28,422 | ||||||||
Total current liabilities | 110,196 | (1,128 | ) | 109,068 | ||||||||
Long-term advances from customers | 3,022 | (460 | ) | 2,562 | ||||||||
Total long-term liabilities | 12,284 | (460 | ) | 11,824 | ||||||||
Accumulated deficit | (696,513 | ) | 16,477 | (680,036 | ) | |||||||
Total shareholders' equity | 229,189 | 16,477 | 245,666 | |||||||||
Total liabilities and shareholders' equity | $ | 351,669 | $ | 14,889 | $ | 366,558 |
Three months ended March 31, 2021 | ||||||||||||
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
U.S. dollars in thousands | ||||||||||||
Revenues: | ||||||||||||
Products | $ | 30,227 | $ | (1,308 | ) | $ | 28,919 | |||||
Services | 14,486 | (34 | ) | 14,452 | ||||||||
Total revenues | 44,713 | (1,342 | ) | 43,371 | ||||||||
Cost of revenues: | ||||||||||||
Products | 22,830 | (1,465 | ) | 21,365 | ||||||||
Services | 9,526 | - | 9,526 | |||||||||
Total cost of revenues | 32,356 | (1,465 | ) | 30,891 | ||||||||
Gross profit | 12,357 | 123 | 12,480 | |||||||||
Operating income (loss) | (3,657 | ) | 123 | (3,534 | ) | |||||||
Income (loss) before taxes on income | (4,849 | ) | 123 | (4,726 | ) | |||||||
Net income (loss) | $ | (5,096 | ) | $ | 123 | $ | (4,973 | ) | ||||
Total earnings (loss) per share: | ||||||||||||
Basic | $ | (0.09 | ) | $ | 0.00 | $ | (0.09 | ) | ||||
Diluted | $ | (0.09 | ) | $ | 0.00 | $ | (0.09 | ) |
Three months ended June 30, 2021 | ||||||||||||
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
U.S. dollars in thousands | ||||||||||||
Revenues: | ||||||||||||
Products | $ | 39,240 | $ | (1,879 | ) | $ | 37,361 | |||||
Services | 17,683 | (246 | ) | 17,437 | ||||||||
Total revenues | 56,923 | (2,125 | ) | 54,798 | ||||||||
Cost of revenues: | ||||||||||||
Products | 30,581 | (2,029 | ) | 28,552 | ||||||||
Services | 9,627 | - | 9,627 | |||||||||
Total cost of revenues | 40,208 | (2,029 | ) | 38,179 | ||||||||
Gross profit | 16,715 | (96 | ) | 16,619 | ||||||||
Operating income (loss) | (337 | ) | (96 | ) | (433 | ) | ||||||
Income before taxes on income | 98 | (96 | ) | 2 | ||||||||
Net income (loss) | $ | (129 | ) | $ | (96 | ) | $ | (225 | ) | |||
Total earnings (loss) per share: | ||||||||||||
Basic | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||
Diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) |
Six months ended June 30, 2021 | ||||||||||||
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
U.S. dollars in thousands | ||||||||||||
Revenues: | ||||||||||||
Products | $ | 69,467 | $ | (3,187 | ) | $ | 66,280 | |||||
Services | 32,169 | (280 | ) | 31,889 | ||||||||
Total revenues | 101,636 | (3,467 | ) | 98,169 | ||||||||
Cost of revenues: | ||||||||||||
Products | 53,411 | (3,494 | ) | 49,917 | ||||||||
Services | 19,153 | - | 19,153 | |||||||||
Total cost of revenues | 72,564 | (3,494 | ) | 69,070 | ||||||||
Gross profit | 29,072 | 27 | 29,099 | |||||||||
Operating income (loss) | (3,994 | ) | 27 | (3,967 | ) | |||||||
Income (loss) before taxes on income | (4,751 | ) | 27 | (4,724 | ) | |||||||
Net income (loss) | $ | (5,225 | ) | $ | 27 | $ | (5,198 | ) | ||||
Total earnings (loss) per share: | ||||||||||||
Basic | $ | (0.09 | ) | $ | 0.00 | $ | (0.09 | ) | ||||
Diluted | $ | (0.09 | ) | $ | 0.00 | $ | (0.09 | ) |
Three months ended September 30, 2021 | ||||||||||||
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
U.S. dollars in thousands | ||||||||||||
Revenues: | ||||||||||||
Products | $ | 32,189 | $ | 218 | $ | 32,407 | ||||||
Services | 17,722 | (351 | ) | 17,371 | ||||||||
Total revenues | 49,911 | (133 | ) | 49,778 | ||||||||
Cost of revenues: | ||||||||||||
Products | 22,175 | - | 22,175 | |||||||||
Services | 10,131 | - | 10,131 | |||||||||
Total cost of revenues | 32,306 | - | 32,306 | |||||||||
Gross profit | 17,605 | (133 | ) | 17,472 | ||||||||
Operating income | 918 | (133 | ) | 785 | ||||||||
Income before taxes on income | 217 | (133 | ) | 84 | ||||||||
Net income | $ | 168 | $ | (133 | ) | $ | 35 | |||||
Total earnings per share: | ||||||||||||
Basic | $ | 0.00 | $ | (0.00 | ) | $ | 0.00 | |||||
Diluted | $ | 0.00 | $ | (0.00 | ) | $ | 0.00 |
Nine months ended September 30, 2021 | ||||||||||||
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
U.S. dollars in thousands | ||||||||||||
Revenues: | ||||||||||||
Products | $ | 101,656 | $ | (2,969 | ) | $ | 98,687 | |||||
Services | 49,891 | (631 | ) | 49,260 | ||||||||
Total revenues | 151,547 | (3,600 | ) | 147,947 | ||||||||
Cost of revenues: | ||||||||||||
Products | 75,586 | (3,494 | ) | 72,092 | ||||||||
Services | 29,284 | - | 29,284 | |||||||||
Total cost of revenues | 104,870 | (3,494 | ) | 101,376 | ||||||||
Gross profit | 46,677 | (106 | ) | 46,571 | ||||||||
Operating income (loss) | (3,076 | ) | (106 | ) | (3,182 | ) | ||||||
Income (loss) before taxes on income | (4,534 | ) | (106 | ) | (4,640 | ) | ||||||
Net income (loss) | $ | (5,057 | ) | $ | (106 | ) | $ | (5,163 | ) | |||
Total earnings (loss) per share: | ||||||||||||
Basic | $ | (0.09 | ) | $ | (0.00 | ) | $ | (0.09 | ) | |||
Diluted | $ | (0.09 | ) | $ | (0.00 | ) | $ | (0.09 | ) |
Three months ended December 31, 2021 | ||||||||||||
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
U.S. dollars in thousands | ||||||||||||
Revenues: | ||||||||||||
Products | $ | 41,114 | $ | 171 | $ | 41,285 | ||||||
Services | 26,157 | (418 | ) | 25,739 | ||||||||
Total revenues | 67,271 | (247 | ) | 67,024 | ||||||||
Cost of revenues: | ||||||||||||
Products | 28,369 | - | 28,369 | |||||||||
Services | 13,959 | - | 13,959 | |||||||||
Total cost of revenues | 42,328 | - | 42,328 | |||||||||
Gross profit | 24,943 | (247 | ) | 24,696 | ||||||||
Operating income | 5,610 | (247 | ) | 5,363 | ||||||||
Income before taxes on income | 5,346 | (247 | ) | 5,099 | ||||||||
Net income | $ | 2,377 | $ | (247 | ) | $ | 2,130 | |||||
Total earnings per share: | ||||||||||||
Basic | $ | 0.04 | $ | (0.00 | ) | $ | 0.04 | |||||
Diluted | $ | 0.04 | $ | (0.00 | ) | $ | 0.04 |
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
U.S. dollars in thousands | ||||||||||||
Three months ended March 31, 2021 | $ | (1,431 | ) | $ | 123 | $ | (1,308 | ) | ||||
Three months ended June 30, 2021 | 2,501 | (96 | ) | 2,405 | ||||||||
Six months ended June 30,2021 | 1,070 | 27 | 1,097 | |||||||||
Three months ended September 30, 2021 | 4,015 | (133 | ) | 3,882 | ||||||||
Nine months ended September 30, 2021 | 5,084 | (106 | ) | 4,978 | ||||||||
Three months ended December 31, 2021 | $ | 10,620 | $ | (247 | ) | $ | 10,373 |
As Reported | Adjustments | As Revised | ||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||
Twelve months ended | U.S. dollars in thousands | |||||||||||
December 31, 2019 | $ | 40,221 | $ | 320 | $ | 40,541 | ||||||
December 31, 2020 | (3,276 | ) | 165 | (3,111 | ) | |||||||
December 31,2021 | $ | 15,705 | $ | (353 | ) | $ | 15,352 |
• | Fixed Networks provides advanced fixed broadband satellite communication networks, satellite communication systems and associated professional services and comprehensive turnkey solutions (which may include in certain instances managed satellite network services). Our customers are service providers, satellite operators, mobile network operators, or MNOs, telecommunication companies, or Telcos, and |
• | Mobility Solutions provides advanced on-the-move satellite communications equipment, systems, and solutions, including airborne, maritime, gateways and ground-mobile satellite systems and solutions. This segment provides solutions for land, sea and air connectivity, focusing on the high-growth IFC market, with our unique leading technology as well as defense and homeland security activities. Our product portfolio includes a leading network platform with high-speed VSATs, high performance on-the-move antennas and high efficiency, high power SSPAs, BUCs and transceivers. Our customers are satellite operators, service providers, system integrators, defense and homeland security organizations, as well as other commercial entities worldwide. |
• | Terrestrial Infrastructure Projects provides fiber and wireless network infrastructure construction of the Programa Nacional de Telecomunicaciones (Pronatel), or PRONATEL, in Peru. |
• | Satellite Networks is focused on the development and supply of networks that are used as the platform that enables the latest satellite constellations of HTS, VHTS and NGSO opportunities worldwide. We provide advanced broadband satellite communication networks and associated professional services and comprehensive turnkey solutions and managed satellite network services solutions. Our customers are service providers, satellite operators, MNOs, Telcos, |
Integrated Solutions |
• | Network Infrastructure and Services is focused on telecom operation and implementation of large-scale networks projects in Peru. We provide terrestrial (fiber optic and wireless network) and satellite network construction and operation. We serve our customers through technology integration, managed networks and services, connectivity services, internet access and telephony over our own networks. We implement projects using various technologies (including our equipment), mainly based on BOT and BOO contracts. |
Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||
U.S. dollars in thousands | Percentage change | Percentage of revenues | ||||||||||||||||||
Fixed Networks | 144,208 | 116,105 | 24.2 | % | 54.1 | % | 41.1 | % | ||||||||||||
Mobility Solutions | 97,180 | 88,397 | 9.9 | % | 36.5 | % | 31.2 | % | ||||||||||||
Terrestrial Infrastructure Projects | 25,003 | 78,254 | (68.0 | )% | 9.4 | % | 27.7 | % | ||||||||||||
Total | 266,391 | 282,756 | (5.8 | )% | 100.0 | % | 100.0 | % |
Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||
As Restated (1) | Percentage change | As Restated (1) | ||||||||||||||||||
U.S. dollars in thousands | Percentage of revenues | |||||||||||||||||||
Fixed Networks | 114,398 | 92,496 | 23.7 | % | 53.2 | % | 55.7 | % | ||||||||||||
Mobility Solutions | 77,614 | 54,169 | 43.3 | % | 36.1 | % | 32.6 | % | ||||||||||||
Terrestrial Infrastructure Projects | 22,958 | 19,470 | 17.9 | % | 10.7 | % | 11.7 | % | ||||||||||||
Total | 214,970 | 166,135 | 29.4 | % | 100.0 | % | 100.0 | % |
(1) | We restated our previously issued consolidated financial statements. For additional information, see Note 2 and Note 17 to our audited consolidated financial statements included in Part III, Item 18 to this Annual Report on Form 20-F. |
Year Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
As Restated (1) | As Restated (1) | |||||||||||||||
U.S. dollars in thousands | Percentage of revenues | |||||||||||||||
Fixed Networks | 41,513 | 30,557 | 36.3 | % | 33.0 | % | ||||||||||
Mobility Solutions | 31,949 | 16,441 | 41.2 | % | 30.4 | % | ||||||||||
Terrestrial Infrastructure Projects | (2,195 | ) | (5,618 | ) | (9.6 | )% | (28.8 | )% | ||||||||
Total | 71,267 | 41,380 | 33.2 | % | 24.9 | % |
(1) | We restated our previously issued consolidated financial statements. For additional information, see Note 2 and Note 17 to our audited consolidated financial statements included in Part III, Item 18 to this Annual Report on Form 20-F. |
Year Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
U.S. dollars in thousands | Percentage of revenues | |||||||||||||||
Fixed Networks | 50,463 | 34,185 | 35.0 | % | 29.4 | % | ||||||||||
Mobility Solutions | 49,185 | 41,904 | 50.6 | % | 47.4 | % | ||||||||||
Terrestrial Infrastructure Projects | (5,611 | ) | 6,406 | (22.4 | )% | 8.2 | % | |||||||||
Total | 94,037 | 82,495 | 35.3 | % | 29.2 | % |
Year Ended | ||||||||||||
December 31, | ||||||||||||
2021 | 2020 | Percentage | ||||||||||
U.S. dollars in thousands | change | |||||||||||
Operating expenses: | ||||||||||||
Research and development, net | 31,336 | 26,303 | 19.1 | % | ||||||||
Selling and marketing | 21,512 | 16,871 | 27.5 | % | ||||||||
General and administrative | 15,587 | 14,063 | 10.8 | % | ||||||||
Merger, acquisition and related litigation expenses (income), net | - | (53,633 | ) | |||||||||
Impairment of held for sale asset | 651 | - | ||||||||||
Total operating expenses | 69,086 | 3,604 |
Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||
As Restated | Percentage | As Restated | ||||||||||||||||||
U.S. dollars in thousands | change | Percentage of revenues | ||||||||||||||||||
Fixed Networks | 92,496 | 127,142 | (27.2 | )% | 55.7 | % | 49.4 | % | ||||||||||||
Mobility Solutions | 54,169 | 104,665 | (48.2 | )% | 32.6 | % | 40.7 | % | ||||||||||||
Terrestrial Infrastructure Projects | 19,470 | 25,527 | (23.7 | )% | 11.7 | % | 9.9 | % | ||||||||||||
Total | 166,135 | 257,334 | (35.4 | )% | 100.0 | % | 100.0 | % |
Year Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
As Restated | As Restated | |||||||||||||||
U.S. dollars in thousands | Percentage of revenues | |||||||||||||||
Fixed Networks | 30,557 | 47,104 | 33.0 | % | 37.1 | % | ||||||||||
Mobility Solutions | 16,441 | 51,402 | 30.4 | % | 49.1 | % | ||||||||||
Terrestrial Infrastructure Projects | (5,618 | ) | (2,309 | ) | (28.9 | )% | (9.1 | )% | ||||||||
Total | 41,380 | 96,197 | 24.9 | % | 37.4 | % |
Year Ended | Year Ended | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
2018 | 2017 | 2020 | 2019 | Percentage | ||||||||||||||||||||
U.S. dollars in thousands | Percentage change | U.S. dollars in thousands | change | |||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Research and development, net | 33,023 | 28,014 | 17.9 | % | 26,303 | 30,184 | (12.86 | )% | ||||||||||||||||
Selling and marketing | 22,706 | 23,759 | (4.4 | )% | 16,871 | 21,488 | (21.49 | )% | ||||||||||||||||
General and administrative | 17,024 | 19,861 | (14.2 | )% | 14,063 | 18,515 | (24.05 | )% | ||||||||||||||||
Merger, acquisition and related litigation expenses (income), net | (53,633 | ) | 118 | - | ||||||||||||||||||||
Total operating expenses | 72,753 | 71,634 | 1.6 | % | 3,604 | 70,305 | (94.87 | )% |
Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
U.S. dollars in thousands | Percentage change | Percentage of revenues | ||||||||||||||||||
Fixed Networks | 116,105 | 124,930 | (7.1 | )% | 41.1 | % | 44.7 | % | ||||||||||||
Mobility Solutions | 88,397 | 62,911 | 40.5 | % | 31.2 | % | 22.5 | % | ||||||||||||
Terrestrial Infrastructure projects | 78,254 | 91,710 | (14.7 | )% | 27.7 | % | 32.8 | % | ||||||||||||
Total | 282,756 | 279,551 | 1.1 | % | 100.0 | % | 100.0 | % |
Year Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
U.S. dollars in thousands | Percentage of revenues | |||||||||||||||
Fixed Networks | 34,185 | 39,944 | 29.4 | % | 32.0 | % | ||||||||||
Mobility Solutions | 41,904 | 21,949 | 47.4 | % | 34.9 | % | ||||||||||
Terrestrial Infrastructure projects | 6,406 | 13,597 | 8.2 | % | 14.8 | % | ||||||||||
Total | 82,495 | 75,490 | 29.2 | % | 27.0 | % |
Year Ended | ||||||||||||
December 31, | ||||||||||||
2017 | 2016 | |||||||||||
U.S. dollars in thousands | Percentage change | |||||||||||
Operating expenses: | ||||||||||||
Research and development, net | 28,014 | 24,853 | 12.7 | % | ||||||||
Selling and marketing | 23,759 | 23,411 | 1.5 | % | ||||||||
General and administrative | 19,861 | 26,471 | (25 | )% | ||||||||
Total operating expenses | 71,634 | 74,735 | 4.1 | % |
Liquidity and Capital Resources |
Years Ended December 31 | Years Ended December 31, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2021 | 2020 | �� | 2019 | ||||||||||||||||||
U.S. dollars in thousands | U.S. dollars in thousands | |||||||||||||||||||||||
Net cash provided by (used in) operating activities | 32,017 | (17,223 | ) | (36,879 | ) | |||||||||||||||||||
Net cash provided by operating activities | 18,903 | 43,160 | 34,782 | |||||||||||||||||||||
Net cash used in investing activities | (10,759 | ) | (3,692 | ) | (4,307 | ) | (11,092 | ) | (4,716 | ) | (7,982 | ) | ||||||||||||
Net cash provided by (used in) financing activities | (2,321 | ) | (4,012 | ) | 23,921 | |||||||||||||||||||
Net cash used in financing activities | (39,003 | ) | (24,095 | ) | (28,936 | ) | ||||||||||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1,490 | ) | 51 | 981 | (303 | ) | (360 | ) | (99 | ) | ||||||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 17,447 | (24,876 | ) | (16,284 | ) | (31,495 | ) | 13,989 | (2,235 | ) | ||||||||||||||
Cash, cash equivalents and restricted cash at beginning of the period | 86,757 | 111,633 | 127,917 | 115,958 | 101,969 | 104,204 | ||||||||||||||||||
Cash, cash equivalents and restricted cash at end of the period.. | 104,204 | 86,757 | 111,633 | |||||||||||||||||||||
Cash, cash equivalents and restricted cash at end of the period. | 84,463 | 115,958 | 101,969 |
Research and Development |
Years Ended December 31, | Years Ended December 31, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2021 | 2020 | 2019 | |||||||||||||||||||
(U.S. dollars in thousands) | (U.S. dollars in thousands) | |||||||||||||||||||||||
Gross research and development costs | 34,449 | 29,433 | 26,477 | 33,031 | 27,689 | 32,208 | ||||||||||||||||||
Less: | ||||||||||||||||||||||||
Grants | 1,426 | 1,419 | 1,624 | 1,695 | 1,386 | 2,024 | ||||||||||||||||||
Research and development costs - net | 33,023 | 28,014 | 24,853 | |||||||||||||||||||||
Research and development costs – net | 31,336 | 26,303 | 30,184 |
D. | Trend Information |
E. |
Contractual Obligations | Payments due by period (in U.S. dollars in thousands) | |||||||||||||||||||
Total | 2019 | 2020-2021 | 2022-2023 | 2024 | ||||||||||||||||
Long-term loans * | 12,556 | 4,458 | 8,098 | - | - | |||||||||||||||
Operating lease (mainly offices) | 4,381 | 1,973 | 1,470 | 938 | - | |||||||||||||||
Space segment services | 15,970 | 8,367 | 7,603 | - | - | |||||||||||||||
Purchase commitments (mainly inventory) | 18,418 | 18,418 | - | - | - | |||||||||||||||
Total contractual cash obligations | 51,325 | 33,216 | 17,171 | 938 | - |
ITEM 6: | DIRECTORS AND SENIOR MANAGEMENT |
A. | Directors and Senior Management |
Name | Age | |
Chairman of the Board of Directors | ||
Chief Executive Officer | ||
Amiram Boehm (3) | ||
Director | ||
Ishay Davidi | Director | |
Director | ||
Dafna Sharir (1)(4) | Director | |
Elyezer Shkedy (1)(2)(4)(5) | Director | |
67 | Director | |
Gil Benyamini | 48 | Chief Financial Officer |
Chief Commercial Officer | ||
Ron Levin | 47 | Chief Operating Officer |
44 | ||
Senior Vice President, Human Resources | ||
Hagay Katz | 62 | Chief Product and Marketing Officer |
(1) | Member of our Audit Committee. |
(2) | Member of our Compensation Committee. |
(3) | “Independent Director” under the applicable NASDAQ Marketplace Rules (see explanation below) |
(4) | “Independent Director” under the applicable NASDAQ Marketplace Rules and the applicable rules of the SEC (see explanation below) |
(5) | “External Director” as required by Israel’s Companies Law (see explanation below) |
B. | Compensation of Directors and Officers |
Salaries, Fees, Directors’ Fees, Commissions and Bonuses (1) | Amounts Set Aside for Pension, Retirement and Similar Benefits | |||||||
All directors and officers as a group (17 persons) (2) | $ | 4,082,844 | $ | 478,069 |
Salaries, Fees, Directors’ Fees, Commissions and Bonuses (1) | Amounts Set Aside for Pension, Retirement and Similar Benefits | |||||||
All directors and officers as a group (18 persons) (2) | $ | 4,658,006 | $ | 464,895 |
(1) | Includes bonuses and equity-based compensation accrued in |
(2) | Includes |
Summary Compensation Table | ||||||||||||||||||||
Information Regarding the Covered Executive in U.S. dollars (1) | ||||||||||||||||||||
Name and Principal Position(2) | Base Salary | Benefits and Perquisites(3) | Variable Compensation(4) | Equity-Based Compensation(5) | Total | |||||||||||||||
Yona Ovadia, CEO | 366,318 | 136,780 | 230,459 | 186,619 | 920,176 | |||||||||||||||
Yuval Shani, Chief Operating Officer | 230,451 | 62,944 | 129,642 | 49,070 | 472,107 | |||||||||||||||
Adi Sfadia, CFO | 218,926 | 62,887 | 105,342 | 50,466 | 437,621 | |||||||||||||||
Michal Aharonov, Vice President, Global Fixed Networks | 218,926 | 53,781 | 92,843 | 35,962 | 401,512 | |||||||||||||||
Alik Shimelmits, Vice President, Research & Development | 202,275 | 49,550 | 88,394 | 35,254 | 375,473 |
Name and Principal Position | Base Salary | Benefits and Perquisites(2) | Variable Compensation(3) | Equity-Based Compensation(4) | Total | |||||||||||||||
Adi Sfadia, CEO | 408,875 | 113,103 | 253,519 | 239,596 | 1,015,094 | |||||||||||||||
Noam Rozenfeld, former Vice President, Research and Development | 262,052 | 63,686 | 98,582 | 81,331 | 505,651 | |||||||||||||||
Michal Aharonov, Vice President, Chief Commercial Officer | 267,627 | 42,593 | 83,786 | 84,435 | 478,441 | |||||||||||||||
Ron Levin, Chief Operating Officer | 253,995 | 57,906 | 78,970 | 80,045 | 470,915 | |||||||||||||||
Bosmat Halpern, former Chief Financial Officer | 223,023 | 53,906 | 106,216 | 62,608 | 445,753 |
(1) | All amounts reported in the table are in terms of cost to our company, as recorded in our financial statements. |
(2) | |
Amounts reported in this column include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites may include, to the extent applicable to each executive, payments, contributions and/or allocations for savings funds, pension, severance, vacation, car or car allowance, medical insurances and benefits, risk insurances (e.g., life, disability, accident), convalescence pay, payments for social security and other benefits and perquisites consistent with our guidelines, but do not include business travel, relocation, professional and business association dues and expenses reimbursed to our directors and officers. | |
Amounts reported in this column refer to Variable Compensation such as | |
Amounts reported in this column represent the expense recorded in our financial statements for the year ended December 31, |
C. | Board Practices |
a breach by the office holder of his duty of care if such breach was performed intentionally or recklessly; |
any fine or penalty levied against the office holder as a result of a criminal offense. |
D. | Employees |
E. | Share Ownership |
ITEM 7: | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
A. | Major Shareholders |
Name | Number of Shares | Percent | ||||||
FIMI Funds (1). | 18,801,865 | 34 | % | |||||
Itshak Sharon (Tshuva) (2) | 3,988,624 | 7.2 | % | |||||
Mivtah Shamir Holdings Ltd. (3) | 5,375,647 | 9.7 | % | |||||
Renaissance Technologies LLC., and Renaissance Technologies Holdings Corporation (4) | 2,938,405 | 5.3 | % | |||||
All directors and executive officers as a group (16 persons) (5) | 2,204,534 | 3.9 | % |
Name | Number of Shares | Percent | ||||||
FIMI Funds (1). | 5,562,994 | 9.8 | % | |||||
Phoenix Holdings Ltd. (2) | 5,269,703 | 9.3 | % | |||||
Meitav Dash Investments Ltd.(3) | 3,755,003 | 6.6 | % | |||||
All directors and executive officers as a group (13 persons) (4) | 315,998 | 0.6 | % |
(1) | Based on a Schedule 13D/A filed on |
(2) | Based on |
(3) | Based on Schedule 13G filed on February 16, 2022 with the SEC by Meitav Dash Investments Ltd. (“Meitav Dash”) and information provided to us by Meitav Dash as of March 31, 2022. The ordinary shares reported are beneficially owned by various direct or indirect, majority or wholly-owned subsidiaries of Meitav Dash (the "Subsidiaries"). Some of the securities reported in the filing are held by third-party client accounts managed by a subsidiary of Meitav Dash as portfolio managers, which subsidiary operates under independent management and makes independent investment decisions and has no voting power in the securities held in such client accounts. The Subsidiaries manage their own funds and/or the funds of others, including for holders of exchange-traded notes or members of pension or provident funds, unit holders of mutual funds, and portfolio management clients. Each of the Subsidiaries operates under independent management and makes its own independent voting and investment decisions. |
(4) |
As of |
B. | Related Party Transactions |
C. | Interests of Experts and Counsel |
ITEM 8: | FINANCIAL INFORMATION |
A. | Consolidated Statements |
ITEM 9: | THE OFFER AND LISTING |
A. | Offer and Listing Details |
B. | Plan of Distribution |
C. | Markets |
D. | Selling Shareholders |
E. | Dilution |
F. | Expense of the Issue |
ITEM 10: | ADDITIONAL INFORMATION |
A. | Share Capital |
B. | Memorandum and Articles of Association |
C. | Material Contracts |
D. | Exchange Controls |
E. | Taxation |
financial institutions or financial services entities; |
F. | Dividend and Paying Agents |
G. | Statement by Experts |
Documents on Display |
I. | Subsidiary Information |
ITEM 12: | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
ITEM 16: | RESERVED |
ITEM 16A: | AUDIT COMMITTEE FINANCIAL EXPERT |
ITEM 16C: | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||
2018 | 2017 | 2021 | 2020 | |||||||||||||||||||||||||||||
Services Rendered | Fees (in thousands) | Percentages | Fees (in thousands) | Percentages | Fees (in thousands) | Percentages | Fees (in thousands) | Percentages | ||||||||||||||||||||||||
Audit fees (1) | $ | 670 | 79.48 | % | $ | 691 | 88.57 | % | $ | 570 | 77.6 | % | $ | 541 | 50.23 | % | ||||||||||||||||
Tax fees (2) | $ | 75 | 8.90 | % | $ | 38 | 4.93 | % | $ | 99 | 13.5 | % | $ | 153 | 14.21 | % | ||||||||||||||||
Other (3) | $ | 98 | 11.62 | % | $ | 51 | 6.50 | % | $ | 65 | 8.9 | % | $ | 383 | 35.56 | % | ||||||||||||||||
Total | $ | 843 | 100 | % | $ | 780 | 100 | % | $ | 734 | 100 | % | $ | 1,077 | 100 | % |
(1) | Audit fees |
(2) | Tax fees are fees for professional services rendered by our auditors for tax compliance, tax planning and tax advice on actual or contemplated transactions. |
(3) | Other fees are fees for professional services other than audit or tax related fees, rendered in connection with our business activities; such fees in |
ITEM 16E: | PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
ITEM 16F: | CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT |
ITEM | CORPORATE GOVERNANCE |
ITEM 16I: | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
ITEM 19: | EXHIBITS |
1.1 | Memorandum of Association, as amended. Previously filed as Exhibit 1.1 to our Annual Report on Form 20-F for the fiscal year ending December 31, 2000, which Exhibit is incorporated herein by reference. |
101.INS | Inline XBRL Instance Document *. |
101.SCH | Inline XBRL Taxonomy Extension Schema Document. |
101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document. |
101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document. |
101.LAB | Inline XBRL Taxonomy Label Linkbase Document. |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
104 | Cover page formatted as Inline XBRL and contained in Exhibit 101 |
* | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. |
GILAT SATELLITE NETWORKS LTD. | |||
By: | /s/ Adi Sfadia | ||
Adi Sfadia | |||
Chief Executive Officer |
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2018
IN U.S. DOLLARS
INDEX
Page | |
F-2 - |
(PCAOB ID No. 1281)
F-7 - | |
F-9 | |
F-10 | |
F-11 | |
F-12 - | |
F-15 - |
| Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Building A, Tel-Aviv 6492102, Israel | Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com |
To the Shareholdersshareholders and Boardthe board of Directorsdirectors of
GILAT SATELLITE NETWORKS LTD.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Gilat Satellite Networks Ltd. ("the Company") and its subsidiaries (the Company) as of December 31, 20182021 and 2017,2020, the related consolidated statements of income (loss), comprehensive income (loss), shareholders'changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2018,2021, and the related notes (collectively referred to as the "consolidated“consolidated financial statements"statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company'sCompany’s internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 18, 2019May 16, 2022 expressed an unqualifiedadverse opinion thereon.
Restatement of 2020 and 2019 Financial Statements
As discussed in Notes 2 and 17 to the consolidated financial statements, the 2020 and 2019 financial statements have been restated to correct a misstatement.
Basis for Opinion
These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
F - 2
Revenue Recognition | |
Description of the Matter | As described in Note 2 to the consolidated financial statements, the Company generates revenue from long-term contracts with its customers, mainly governmental projects, for which the related performance obligations are primarily satisfied over time. The Company recognizes revenue on such contracts using the percentage-of-completion method of accounting, based primarily on cost-to-cost measure of progress ("input method"). Under this method, the Company measures progress towards completion based on the ratio of costs incurred to date to the estimated total costs to complete their performance obligation (referred to as the estimate-at-completion, or “EAC”). |
The determination of contract EACs requires management to make significant estimates and assumptions to calculate recorded contract revenue, costs, and profit. At the outset of a long-term contract, the Company identifies risks related to the achievement of the technical, schedule and cost aspects of the contract. Significant changes in EAC estimates could have a material effect on the Company’s estimated revenue and gross profit recorded during the period under audit. Auditing the Company’s estimates of total contract revenue and costs used to recognize revenue based on the percentage-of-completion method of accounting was complex due to the significant auditor judgment involved in evaluating management's significant estimates and assumptions over project technical, schedule and cost aspects, at contract inception and throughout the contract's life cycle. As discussed in Management’s Report on Internal Control Over Financial Reporting, the Company also identified material weaknesses related to the implementation of accounting standard ASC 606 “Revenue from Contracts with Customers” and estimation of costs, which resulted in additional judgment in determining the nature and extent of procedures to be performed over revenue. | |
How We Addressed the Matter in Our Audit | As a result of the material weaknesses identified by management, we altered the nature and extent of our substantive audit procedures in this area by performing incremental procedures. To evaluate the Company’s contract estimates related to revenue recognized and test the Company's EAC analyses, our substantive audit procedures included, among others, inspecting contracts and the related contractual terms, evaluating the appropriateness of management’s estimation process from the inception of a contract, and evaluating the Company's historical ability to accurately estimate expected costs by comparing management's estimates of labor hours, subcontractor costs and materials required to complete the contract to actual results. We also compared recorded costs incurred to supporting information and agreed key contract terms to contract documentation. In addition, we evaluated whether the variances in costs incurred from projected costs were properly reflected in the EAC analysis. In addition, we assessed the appropriateness of the related disclosures in the consolidated financial statements. |
Valuation of deferred tax asset | |
Description of the Matter | As described in Note 12 to the consolidated financial statements, the Company’s consolidated net deferred tax assets of $17,551 thousands, primarily related to the deferred tax assets established for carry forward operating losses. Management records valuation allowances to reduce the carrying value of deferred tax assets to amounts that are more likely than not to be realized. Management assesses existing deferred tax assets, net operating losses and tax credits by jurisdiction and expectations of the Company’s ability to utilize these tax attributes through a review of past, current and estimated future taxable income and establishment of tax planning strategies. The principal considerations for our determination that performing procedures relating to the income tax valuation allowances on deferred tax assets is a critical audit matter are there was significant judgment by management when estimating future taxable income. Auditing management’s assessment of the realizability of its deferred tax assets involved complex auditor judgment because management’s estimate of future taxable income is highly judgmental and based on significant assumptions that may be affected by future market conditions and the Company’s performance. |
F - 3
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over management’s plan for future realization of deferred tax assets. For example, we tested controls around the determination of key assumptions used in management’s projections of future taxable income. To test the deferred income tax asset, our audit procedures included, among others: comparing the assumptions used by management to the Company´s approved budget; evaluating management assumptions to develop estimates of future taxable income and tested the completeness and accuracy of the underlying data. For example, we compared the estimates of future taxable income with the actual results of prior periods, as well as management's consideration of other future market conditions. Additionally, we utilized tax professionals to assist us in assessing the application of tax regulations in management’s computation; evaluating the application of the relevant accounting standard; retrospectively assessing past management estimations about net deferred tax asset recoverability; comparing the prospective financial information and underlying assumptions to industry and economic trends, changes in the entity’s business model, customer base and product mix. In addition, we assessed the adequacy of the related disclosures in the consolidated financial statements. |
/s/ KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
We have served as the Company'sCompany’s auditor since 2000.
Tel-Aviv, Israel
May 16, 2022
F - 2
| Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Building A, Tel-Aviv 6492102, Israel | Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
GILAT SATELLITE NETWORKS LTD.
Opinion on Internal Control overOver Financial Reporting
We have audited Gilat Satellite Networks Ltd. ("the Company") and its subsidiaries' internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control-IntegratedControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, because of the Company and itseffect of the material weaknesses described below on the achievement of the objectives of the control criteria, Gilat Satellite Networks Ltd. And subsidiaries (the Company) has not maintained in all material respects, effective internal control over financial reporting as of December 31, 2018,2021, based on the COSO criteria.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses has been identified and included in management’s assessment. inappropriate control over the accounting implementation due to inaccurate interpretation of the adoption of Accounting Standard ASC 606, "Revenues from contracts with customers" in 2018 and inappropriate control over the level of documented evidence when performing management review control over management estimates of costs.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20182021 and 2017,2020, the related consolidated statements of income (loss), comprehensive income (loss), shareholders'changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2018,2021, and the related notes,notes. This material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the 2021 consolidated financial statements, and this report does not affect our report dated March 18, 2019May 16, 2022, which expressed an unqualified opinion thereon.
Basis for Opinion
The Company'sCompany’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management'sManagement’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company'sCompany’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
F - 3
Definition and Limitations of Internal Control Over Financial Reporting
A company'scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company'scompany’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
Tel-Aviv, Israel
May 16, 2022
F - 4
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
U.S. dollars in thousands
December 31, | ||||||||
2021 | 2020 | |||||||
As Restated (1) | ||||||||
ASSETS | ||||||||
| ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 81,859 | $ | 88,754 | ||||
Short-term deposits | 2,159 | 0- | ||||||
Restricted cash | 2,592 | 27,162 | ||||||
Trade receivables (net of allowance for credit losses of $1,104 and $1,933 as of December 31, 2021 and 2020, respectively) | 39,161 | 27,976 | ||||||
Contract assets | 26,008 | 47,079 | ||||||
Inventories | 28,432 | 31,304 | ||||||
Other current assets | 14,607 | 16,637 | ||||||
Held for sale asset | 4,587 | 0- | ||||||
| ||||||||
Total current assets | 199,405 | 238,912 | ||||||
| ||||||||
LONG-TERM ASSETS: | ||||||||
Restricted cash | 12 | 42 | ||||||
Long-term contract assets | 12,539 | 12,880 | ||||||
Severance pay funds | 6,795 | 6,665 | ||||||
Deferred taxes | 17,551 | 19,295 | ||||||
Operating lease right-of-use assets | 4,478 | 4,879 | ||||||
Other long-term assets | 10,456 | 7,797 | ||||||
| ||||||||
Total long-term assets | 51,831 | 51,558 | ||||||
| ||||||||
PROPERTY AND EQUIPMENT, NET | 72,391 | 77,172 | ||||||
| ||||||||
INTANGIBLE ASSETS, NET | 640 | 1,082 | ||||||
| ||||||||
GOODWILL | 43,468 | 43,468 | ||||||
| ||||||||
Total assets | $ | 367,735 | $ | 412,192 |
December 31, | ||||||||
2018 | 2017 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 67,381 | $ | 52,957 | ||||
Restricted cash | 32,305 | 29,288 | ||||||
Restricted cash held by trustees | 4,372 | 4,325 | ||||||
Trade receivables, net | 47,164 | 50,053 | ||||||
Contract assets | 47,760 | 58,789 | ||||||
Inventories | 21,109 | 28,853 | ||||||
Other current assets | 26,022 | 19,415 | ||||||
Total current assets | 246,113 | 243,680 | ||||||
LONG-TERM ASSETS: | ||||||||
Restricted cash | 146 | 187 | ||||||
Severance pay funds | 6,780 | 8,188 | ||||||
Deferred tax asset | 4,127 | 861 | ||||||
Other receivables | 7,276 | 7,217 | ||||||
Total long-term assets | 18,329 | 16,453 | ||||||
PROPERTY AND EQUIPMENT, NET | 84,403 | 82,246 | ||||||
INTANGIBLE ASSETS, NET | 2,434 | 5,709 | ||||||
GOODWILL | 43,468 | 43,468 | ||||||
Total assets | $ | 394,747 | $ | 391,556 |
(1) The Company restated previously issued consolidated financial statements. See Note 2 and Note 17 for additional information.
The accompanying notes are an integral part of the consolidated financial statements.
May 16, 2022 | ||||
Date of approval of the | Adi Sfadia | Gil Benyamini | ||
financial statements | Chief Executive Officer | Chief Financial Officer |
F - 5
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share and per share data)
December 31, | ||||||||
2021 | 2020 | |||||||
As Restated (1) | ||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| ||||||||
CURRENT LIABILITIES: | ||||||||
Current maturity of long-term loan | $ | 0- | $ | 4,000 | ||||
Trade payables | 19,776 | 20,487 | ||||||
Accrued expenses | 49,202 | 49,882 | ||||||
Advances from customers and deferred revenues | 24,373 | 24,205 | ||||||
Operating lease liabilities | 1,818 | 1,911 | ||||||
Dividend payable | 0- | 35,003 | ||||||
Other current liabilities | 13,339 | 13,322 | ||||||
| ||||||||
Total current liabilities | 108,508 | 148,810 | ||||||
| ||||||||
LONG-TERM LIABILITIES: | ||||||||
Accrued severance pay | 7,292 | 7,136 | ||||||
Long-term advances from customers | 1,209 | 2,238 | ||||||
Operating lease liabilities | 2,283 | 2,985 | ||||||
Other long-term liabilities | 120 | 631 | ||||||
| ||||||||
Total long-term liabilities | 10,904 | 12,990 | ||||||
| ||||||||
COMMITMENTS AND CONTINGENCIES | 0 | 0 | ||||||
| ||||||||
SHAREHOLDERS' EQUITY: | ||||||||
Share capital - | ||||||||
Ordinary shares of NIS 0.2 par value: Authorized: 90,000,000 shares as of December 31, 2021 and 2020; Issued and outstanding: 56,539,237 and 55,559,638 shares as of December 31, 2021 and 2020, respectively | 2,706 | 2,647 | ||||||
Additional paid-in capital | 929,871 | 928,626 | ||||||
Accumulated other comprehensive loss | (6,357 | ) | (6,017 | ) | ||||
Accumulated deficit | (677,897 | ) | (674,864 | ) | ||||
| ||||||||
Total shareholders' equity | 248,323 | 250,392 | ||||||
| ||||||||
Total liabilities and shareholders' equity | $ | 367,735 | $ | 412,192 |
December 31, | ||||||||
2018 | 2017 | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Current maturities of long-term loans | $ | 4,458 | $ | 4,479 | ||||
Trade payables | 24,636 | 33,715 | ||||||
Accrued expenses | 67,533 | 75,270 | ||||||
Advances from customers and deferred revenues | 29,133 | 16,721 | ||||||
Advances from customers held by trustees | - | 1,416 | ||||||
Other current liabilities | 14,588 | 20,044 | ||||||
Total current liabilities | 140,348 | 151,645 | ||||||
LONG-TERM LIABILITIES: | ||||||||
Loans, net of current maturities | 8,098 | 12,582 | ||||||
Accrued severance pay | 6,649 | 7,999 | ||||||
Other liabilities | 580 | 1,008 | ||||||
Total long-term liabilities | 15,327 | 21,589 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
SHAREHOLDERS' EQUITY: | ||||||||
Share capital - Ordinary shares of NIS 0.2 par value: Authorized: 90,000,000 shares at December 31, 2018 and 2017; Issued and outstanding: 55,176,107 and 54,737,267 shares at December 31, 2018 and 2017, respectively | 2,625 | 2,601 | ||||||
Additional paid-in capital | 924,856 | 921,726 | ||||||
Accumulated other comprehensive loss | (5,380 | ) | (3,046 | ) | ||||
Accumulated deficit | (683,029 | ) | (702,959 | ) | ||||
Total shareholders' equity | 239,072 | 218,322 | ||||||
Total liabilities and shareholders' equity | $ | 394,747 | $ | 391,556 |
(1) The Company restated previously issued consolidated financial statements. See Note 2 and Note 17 for additional information.
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
U.S. dollars in thousands (except share and per share data)
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
As Restated (1) | ||||||||||||
Revenues: | ||||||||||||
Products | $ | 139,972 | $ | 94,435 | $ | 179,685 | ||||||
Services | 74,998 | 71,700 | 77,649 | |||||||||
| ||||||||||||
Total revenues | 214,970 | 166,135 | 257,334 | |||||||||
| ||||||||||||
Cost of revenues: | ||||||||||||
Products | 100,460 | 84,385 | 115,593 | |||||||||
Services | 43,243 | 40,370 | 45,544 | |||||||||
| ||||||||||||
Total cost of revenues | 143,703 | 124,755 | 161,137 | |||||||||
| ||||||||||||
Gross profit | 71,267 | 41,380 | 96,197 | |||||||||
| ||||||||||||
Operating expenses: | ||||||||||||
Research and development, net | 31,336 | 26,303 | 30,184 | |||||||||
Selling and marketing | 21,512 | 16,871 | 21,488 | |||||||||
General and administrative | 15,587 | 14,063 | 18,515 | |||||||||
Merger, acquisition and related litigation expenses (income), net | 0- | (53,633 | ) | 118 | ||||||||
Impairment of held for sale asset | 651 | 0- | 0- | |||||||||
| ||||||||||||
Total operating expenses | 69,086 | 3,604 | 70,305 | |||||||||
| ||||||||||||
Operating income | 2,181 | 37,776 | 25,892 | |||||||||
| ||||||||||||
Financial expenses, net | 1,722 | 1,907 | 2,617 | |||||||||
| ||||||||||||
Income before taxes on income | 459 | 35,869 | 23,275 | |||||||||
Taxes on income (tax benefit) | 3,492 | 793 | (13,583 | ) | ||||||||
| ||||||||||||
Net income (loss) | $ | (3,033 | ) | $ | 35,076 | $ | 36,858 | |||||
| ||||||||||||
Total earnings (loss) per share: | ||||||||||||
Basic | $ | (0.05 | ) | $ | 0.63 | $ | 0.67 | |||||
Diluted | $ | (0.05 | ) | $ | 0.63 | $ | 0.66 | |||||
| ||||||||||||
Weighted average number of shares used in computing earnings (loss) per share: | ||||||||||||
Basic | 56,401,074 | 55,516,113 | 55,368,703 | |||||||||
Diluted | 56,401,074 | 55,583,474 | 56,030,976 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Revenues: | ||||||||||||
Products | $ | 173,966 | $ | 214,522 | $ | 214,291 | ||||||
Services | 92,425 | 68,234 | 65,260 | |||||||||
Total revenues | 266,391 | 282,756 | 279,551 | |||||||||
Cost of revenues: | ||||||||||||
Products | 121,147 | 153,167 | 162,563 | |||||||||
Services | 51,207 | 47,094 | 41,498 | |||||||||
Total cost of revenues | 172,354 | 200,261 | 204,061 | |||||||||
Gross profit | 94,037 | 82,495 | 75,490 | |||||||||
Operating expenses: | ||||||||||||
Research and development, net | 33,023 | 28,014 | 24,853 | |||||||||
Selling and marketing | 22,706 | 23,759 | 23,411 | |||||||||
General and administrative | 17,024 | 19,861 | 26,471 | |||||||||
Total operating expenses | 72,753 | 71,634 | 74,735 | |||||||||
Operating income | 21,284 | 10,861 | 755 | |||||||||
Financial expenses, net | 4,298 | 4,307 | 4,843 | |||||||||
Net income (loss) before taxes on income | 16,986 | 6,554 | (4,088 | ) | ||||||||
Taxes on income (tax benefit) | (1,423 | ) | (247 | ) | 1,252 | |||||||
Net income (loss) | $ | 18,409 | $ | 6,801 | $ | (5,340 | ) | |||||
Total earnings (loss) per share: | ||||||||||||
Basic | $ | 0.34 | $ | 0.12 | $ | (0.10 | ) | |||||
Diluted | $ | 0.33 | $ | 0.12 | $ | (0.10 | ) | |||||
Weighted average number of shares used in computing earnings (loss) per share: | ||||||||||||
Basic | 54,927,272 | 54,680,822 | 51,970,458 | |||||||||
Diluted | 55,752,642 | 54,851,967 | 51,970,458 |
(1) The Company restated previously issued consolidated financial statements. See Note 2 and Note 17 for additional information.
The accompanying notes are an integral part of the consolidated financial statements.
F - 7
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
U.S. dollars in thousands
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
As Restated (1) | ||||||||||||
| ||||||||||||
Net income (loss) | $ | (3,033 | ) | $ | 35,076 | $ | 36,858 | |||||
| ||||||||||||
Other comprehensive income (loss): | ||||||||||||
Foreign currency translation adjustments | (348 | ) | (969 | ) | 14 | |||||||
Change in unrealized gain on hedging instruments, net | 66 | 169 | 653 | |||||||||
Less - reclassification adjustments for net gain realized on hedging instruments, net | (58 | ) | (169 | ) | (335 | ) | ||||||
| ||||||||||||
Total other comprehensive income (loss) | (340 | ) | (969 | ) | 332 | |||||||
| ||||||||||||
Comprehensive income (loss) | $ | (3,373 | ) | $ | 34,107 | $ | 37,190 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Net income (loss) | $ | 18,409 | $ | 6,801 | $ | (5,340 | ) | |||||
Other comprehensive income (loss): | ||||||||||||
Foreign currency translation adjustments | (1,845 | ) | (95 | ) | 514 | |||||||
Change in unrealized gain (loss) on hedging instruments, net | (1,548 | ) | 1,419 | 396 | ||||||||
Less - reclassification adjustments for net loss (gain) realized and included in income (loss) on hedging instruments, net | 1,059 | (1,146 | ) | (407 | ) | |||||||
Total other comprehensive income (loss) | (2,334 | ) | 178 | 503 | ||||||||
Comprehensive income (loss) | $ | 16,075 | $ | 6,979 | $ | (4,837 | ) |
(1) The Company restated previously issued consolidated financial statements. See Note 2 and Note 17 for additional information.
The accompanying notes are an integral part of the consolidated financial statements.
F - 8
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
U.S. dollars in thousands (except sharenumber of ordinary shares data)
Number of ordinary shares | Share capital | Additional paid-in capital | Accumulated other comprehensive income (loss) | Accumulated Deficit | Total shareholders' equity | |||||||||||||||||||
As Restated (1) | ||||||||||||||||||||||||
| ||||||||||||||||||||||||
Balance as of December 31, 2018 (1) | 55,176,107 | 2,625 | 924,856 | (5,380 | ) | (666,932 | ) | 255,169 | ||||||||||||||||
| ||||||||||||||||||||||||
Stock-based compensation of options | - | - | 2,135 | - | - | 2,135 | ||||||||||||||||||
Exercise of stock options | 317,151 | 18 | 357 | - | - | 375 | ||||||||||||||||||
Dividend distribution | - | - | - | - | (24,864 | ) | (24,864 | ) | ||||||||||||||||
Comprehensive income (1) | - | - | - | 332 | 36,858 | 37,190 | ||||||||||||||||||
| ||||||||||||||||||||||||
Balance as of December 31, 2019 (1) | 55,493,258 | 2,643 | 927,348 | (5,048 | ) | (654,938 | ) | 270,005 | ||||||||||||||||
| ||||||||||||||||||||||||
Stock-based compensation of options | - | - | 1,282 | - | - | 1,282 | ||||||||||||||||||
Exercise of stock options | 66,380 | 4 | (4 | ) | - | - | - | |||||||||||||||||
Dividend distribution | - | - | - | - | (19,999 | ) | (19,999 | ) | ||||||||||||||||
Dividend payable | - | - | - | - | (35,003 | ) | (35,003 | ) | ||||||||||||||||
Comprehensive income (loss) (1) | - | - | - | (969 | ) | 35,076 | 34,107 | |||||||||||||||||
| ||||||||||||||||||||||||
Balance as of December 31, 2020 (1) | 55,559,638 | 2,647 | 928,626 | (6,017 | ) | (674,864 | ) | 250,392 | ||||||||||||||||
| ||||||||||||||||||||||||
Stock-based compensation of options | - | - | 1,304 | - | - | 1,304 | ||||||||||||||||||
Exercise of stock options | 979,599 | 59 | (59 | ) | - | - | - | |||||||||||||||||
Comprehensive loss | - | - | - | (340 | ) | (3,033 | ) | (3,373 | ) | |||||||||||||||
| ||||||||||||||||||||||||
Balance as of December 31, 2021 | 56,539,237 | 2,706 | 929,871 | (6,357 | ) | (677,897 | ) | 248,323 |
Number of Ordinary shares | Share capital | Additional paid-in capital | Accumulated other comprehensive income (loss) | Accumulated deficit | Total shareholders' equity | |||||||||||||||||||
Balance as of January 1, 2016 | 44,333,047 | $ | 2,048 | $ | 884,126 | $ | (3,727 | ) | $ | (704,365 | ) | $ | 178,082 | |||||||||||
Issuance of shares in a rights offering, net of issuance costs | 9,874,170 | 525 | 34,560 | - | - | 35,085 | ||||||||||||||||||
Issuance of restricted share units (RSUs) | 214,350 | 11 | - | - | - | 11 | ||||||||||||||||||
Stock-based compensation of options and RSUs | - | - | 908 | - | - | 908 | ||||||||||||||||||
Exercise of stock options | 171,100 | 9 | 568 | - | - | 577 | ||||||||||||||||||
Comprehensive income (loss) | - | - | - | 503 | (5,340 | ) | (4,837 | ) | ||||||||||||||||
Balance as of December 31, 2016 | 54,592,667 | 2,593 | 920,162 | (3,224 | ) | (709,705 | ) | 209,826 | ||||||||||||||||
Effect of adoption of ASU 2016-09 | - | - | 55 | - | (55 | ) | - | |||||||||||||||||
Issuance of restricted share units (RSUs) | 8,100 | * | ) | - | - | - | * | ) | ||||||||||||||||
Stock-based compensation of options and RSUs | - | - | 856 | - | - | 856 | ||||||||||||||||||
Exercise of stock options | 136,500 | 8 | 653 | - | - | 661 | ||||||||||||||||||
Comprehensive income | - | - | - | 178 | 6,801 | 6,979 | ||||||||||||||||||
Balance as of December 31, 2017 | 54,737,267 | 2,601 | 921,726 | (3,046 | ) | (702,959 | ) | 218,322 | ||||||||||||||||
Effect of adoption of ASC 606 | - | - | - | - | 1,521 | 1,521 | ||||||||||||||||||
Stock-based compensation of options | - | - | 1,006 | - | - | 1,006 | ||||||||||||||||||
Exercise of stock options | 438,840 | 24 | 2,124 | - | - | 2,148 | ||||||||||||||||||
Comprehensive income (loss) | - | - | - | (2,334 | ) | 18,409 | 16,075 | |||||||||||||||||
Balance as of December 31, 2018 | 55,176,107 | $ | 2,625 | $ | 924,856 | $ | (5,380 | ) | $ | (683,029 | ) | $ | 239,072 |
(1) The Company restated previously issued consolidated financial statements. See Note 2 and Note 17 for additional information.
The accompanying notes are an integral part of the consolidated financial statements.
F - 9
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
U.S. dollars in thousands
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
As Restated (1) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
| ||||||||||||
Net income (loss) | $ | (3,033 | ) | $ | 35,076 | $ | 36,858 | |||||
| ||||||||||||
Adjustments required to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 10,991 | 10,291 | 10,978 | |||||||||
Capital loss from disposal of property and equipment and impairment of held for sale asset | 651 | 181 | 461 | |||||||||
Stock-based compensation of options | 1,304 | 1,282 | 2,135 | |||||||||
Accrued severance pay, net | 26 | 242 | 361 | |||||||||
Exchange rate differences on long-term loan | 0- | 0- | (12 | ) | ||||||||
Deferred taxes, net | 1,744 | (867 | ) | (14,883 | ) | |||||||
Decrease (increase) in trade receivables, net | (11,205 | ) | 19,332 | (1,323 | ) | |||||||
Decrease (increase) in contract assets | 21,412 | (18,489 | ) | 32,228 | ||||||||
Decrease (increase) in other assets and receivables | (247 | ) | 8,941 | 1,511 | ||||||||
Decrease (increase) in inventories | 2,449 | (5,050 | ) | (8,076 | ) | |||||||
Decrease in trade payables | (711 | ) | (157 | ) | (3,884 | ) | ||||||
Decrease in accrued expenses | (1,482 | ) | (7,463 | ) | (18,149 | ) | ||||||
Decrease in advances from customers and deferred revenues | (917 | ) | (1,535 | ) | (896 | ) | ||||||
Increase (decrease) in other liabilities | (2,079 | ) | 1,376 | (2,527 | ) | |||||||
| ||||||||||||
Net cash provided by operating activities | 18,903 | 43,160 | 34,782 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | 18,409 | $ | 6,801 | $ | (5,340 | ) | |||||
Adjustments required to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation and amortization | 13,149 | 13,140 | 13,108 | |||||||||
Capital loss (gain) from disposal of property and equipment | 275 | 245 | (88 | ) | ||||||||
Stock-based compensation of options and RSUs | 1,006 | 856 | 908 | |||||||||
Accrued severance pay, net | 57 | 118 | (267 | ) | ||||||||
Exchange rate differences on long-term loans | (34 | ) | 186 | (43 | ) | |||||||
Deferred income taxes, net | (3,672 | ) | 189 | 4 | ||||||||
Decrease (increase) in trade receivables, net | 2,061 | (2,512 | ) | 4,127 | ||||||||
Decrease (increase) in contract assets | 11,029 | (17,076 | ) | (41,713 | ) | |||||||
Increase in other assets and receivables | (4,917 | ) | (9,147 | ) | (2,966 | ) | ||||||
Decrease (increase) in inventories | 5,743 | (10,763 | ) | 2,221 | ||||||||
Increase (decrease) in trade payables | (8,926 | ) | 4,087 | 12,454 | ||||||||
Increase (decrease) in accrued expenses | (7,206 | ) | 19,633 | 30,149 | ||||||||
Increase (decrease) in advances from customers and deferred revenues | 12,433 | (20,858 | ) | (50,008 | ) | |||||||
Decrease in advances from customers held by trustees | (1,478 | ) | (6,185 | ) | (18 | ) | ||||||
Increase (decrease) in other liabilities | (5,912 | ) | 4,063 | 593 | ||||||||
Net cash provided by (used in) operating activities | 32,017 | (17,223 | ) | (36,879 | ) |
(1) The Company restated previously issued consolidated financial statements. See Note 2 and Note 17 for additional information.
The accompanying notes are an integral part of the consolidated financial statements.
F - 10
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Cash flows from investing activities: | ||||||||||||
| ||||||||||||
Purchase of property and equipment | (8,933 | ) | (4,716 | ) | (7,982 | ) | ||||||
Investment in short-term deposits | (2,159 | ) | 0- | 0- | ||||||||
| ||||||||||||
Net cash used in investing activities | (11,092 | ) | (4,716 | ) | (7,982 | ) | ||||||
| ||||||||||||
Cash flows from financing activities: | ||||||||||||
| ||||||||||||
Proceeds from exercise of stock options | 0- | 0- | 375 | |||||||||
Repayment of long-term loans | (4,000 | ) | (4,096 | ) | (4,447 | ) | ||||||
Dividend payment | (35,003 | ) | (19,999 | ) | (24,864 | ) | ||||||
| ||||||||||||
Net cash used in financing activities | (39,003 | ) | (24,095 | ) | (28,936 | ) | ||||||
| ||||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (303 | ) | (360 | ) | (99 | ) | ||||||
| ||||||||||||
Increase (decrease) in cash, cash equivalents and restricted cash | (31,495 | ) | 13,989 | (2,235 | ) | |||||||
Cash, cash equivalents and restricted cash at the beginning of the year | 115,958 | 101,969 | 104,204 | |||||||||
| ||||||||||||
Cash, cash equivalents and restricted cash at the end of the year (a) | $ | 84,463 | $ | 115,958 | $ | 101,969 | ||||||
| ||||||||||||
Supplementary disclosure of cash flows activities: | ||||||||||||
| ||||||||||||
(A) Cash paid during the year for: | ||||||||||||
| ||||||||||||
Interest | $ | 98 | $ | 293 | $ | 509 | ||||||
| ||||||||||||
Taxes on income | $ | 1,191 | $ | 1,084 | $ | 1,580 | ||||||
| ||||||||||||
(B) Non-cash transactions: | ||||||||||||
| ||||||||||||
Purchases of property and equipment that were not paid for and reclassification from inventories to property and equipment | $ | 2,426 | $ | 285 | $ | 1,449 | ||||||
| ||||||||||||
Reclassification from property and equipment to inventories | $ | 0- | $ | 155 | $ | 680 | ||||||
| ||||||||||||
New operating lease assets obtained in exchange for operating lease liabilities | $ | 913 | $ | 3,175 | $ | 1,469 | ||||||
| ||||||||||||
Dividends declared | $ | 0- | $ | 35,003 | $ | 0- |
F - 13
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Cash flows from investing activities: | ||||||||||||
Purchase of property and equipment | (10,759 | ) | (3,692 | ) | (4,307 | ) | ||||||
Net cash used in investing activities | (10,759 | ) | (3,692 | ) | (4,307 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Capital lease payments | - | - | (309 | ) | ||||||||
Issuance of shares in a rights offering, net of issuance costs | - | - | 35,085 | |||||||||
Proceeds from exercise of stock option and restricted stock units | 2,149 | 661 | 588 | |||||||||
Short-term bank credit and loans, net | - | - | (7,000 | ) | ||||||||
Repayment of long-term loans | (4,470 | ) | (4,673 | ) | (4,443 | ) | ||||||
Net cash provided by (used in) financing activities | (2,321 | ) | (4,012 | ) | 23,921 | |||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (1,490 | ) | 51 | 981 | ||||||||
Increase (decrease) in cash, cash equivalents and restricted cash | 17,447 | (24,876 | ) | (16,284 | ) | |||||||
Cash, cash equivalents and restricted cash at the beginning of the year | 86,757 | 111,633 | 127,917 | |||||||||
Cash, cash equivalents and restricted cash at the end of the year | $ | 104,204 | $ | 86,757 | $ | 111,633 |
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
(a)The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheets:
Supplementary disclosure of cash flows activities: | ||||||||||||
(1) Cash paid during the year for: | ||||||||||||
Interest | $ | 303 | $ | 906 | $ | 1,448 | ||||||
Income taxes | $ | 3,900 | $ | 2,410 | $ | 2,105 | ||||||
(2) Non-cash transactions: | ||||||||||||
Purchases of property and equipment that were not paid for and reclassification from inventories to property and equipment | $ | 2,307 | $ | 5,710 | $ | 2,452 | ||||||
Reclassification from property and equipment to inventories | $ | 343 | $ | 129 | $ | 733 |
December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
| ||||||||||||
Cash and cash equivalents | $ | 81,859 | $ | 88,754 | $ | 74,778 | ||||||
Restricted cash - Current | 2,592 | 27,162 | 27,067 | |||||||||
Restricted cash - Long-Term | 12 | 42 | 124 | |||||||||
Cash, cash equivalents and restricted cash | $ | 84,463 | $ | 115,958 | $ | 101,969 |
The accompanying notes are an integral part of the consolidated financial statements.
F - 11
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
U.S. dollars in thousands
NOTE 1:-GENERAL
a.Organization:
Gilat Satellite Networks Ltd. and its subsidiaries (the “Company”) is a global provider of satellite-based broadband communications. The Company designs and manufactures ground-based satellite communications equipment, and provides comprehensive solutions and end-to-end services, powered by its technology. The Company’s portfolio comprisesincludes a cloud basedcloud-based satellite network platform, very small aperture terminalsVery Small Aperture Terminals ("VSATs"), amplifiers, high-speed modems, high-performance on-the-move antennas, and high power solid-state power amplifiersSolid-State Power Amplifiers ("SSPAs"), Block Up Converters (“BUCs”) and block up converters (“BUCs”).Transceivers. The Company’s solutions support multiple applications with a full portfolio of products to address key applications including broadband access, cellular backhaul, enterprise, in-flight connectivity,In-Flight Connectivity ("IFC"), maritime, trains, defense and public safety. The Company also provides connectivity services, internet access and telephony, to enterprise, government and residential customers utilizing both its own networks, and also other networks that it installs, mainly based on Build Operate Transfer (“BOT”) and Build Own Operate (“BOO”) contracts. In these projects, the Company builds telecommunication infrastructure typically using fiber-optic and wireless technologies for the broadband connectivity. The Company also provides managed network services over VSAT networks owned by others.
The Company was incorporated in Israel in 1987 and launched its first generation VSAT in 1989.
As of December 31, 2017,2021, the Company’s business was managed and reportedCompany operates in three business segments: Commercial,operating segments consisting of Fixed Networks, Mobility Solutions and Services. Terrestrial Infrastructure Projects.
Commencing January 1, 2018,in the first quarter of 2022, in order to more accurately reflect the Company’s new management’s approach in the management focus,of the Company’s operations, organizational alignment, the Company’s customercustomers base and end markets, the Company operates in three new business segments consistingoperating segments. For additional information, including major customers, geographic and segment information, see Note 15.
b.The Company depends on major suppliers to supply certain components and services for the production of Fixed Networks, Mobilityits products or providing services. If these suppliers fail to deliver or delay the delivery of the necessary components or services, the Company will be required to seek alternative sources of supply. A change in suppliers could result in product redesign, manufacturing delays or services delays which could cause a possible loss of sales and Terrestrial Infrastructure Projects. See Note 13 for additional information.
F - 12
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 1:-GENERAL (Cont.)
c.The ongoing COVID-19 pandemic continues to have an adverse effect on the Company’s industry and the markets in which the Company operates. The COVID-19 outbreak has significantly impacted the travel and aviation markets in which the Company’s significant IFC customers operate and has resulted in a significant reduction of the Company’s business with some of these customers. The Company has also experienced postponed and delayed orders in certain other areas of its businesses. Further, the guidance of social distancing, lockdowns, quarantines and the requirements to work from home in various key territories such as Israel, Peru, California, Australia, Bulgaria, China and other countries, in addition to greatly reduced travel globally, has resulted in a substantial curtailment of business activities, which has affected and is likely to continue to affect the Company’s ability to conduct fieldwork as well as deliver products and services in the areas where restrictions are implemented by the local government. In addition, certain of the Company’s sales and support teams are unable to travel or meet with customers and the pandemic threat has caused operating, manufacturing, supply chain and project development delays and disruptions, labor shortages, travel and shipping disruptions and shutdowns (including as a result of government regulation and prevention measures). As a result, the Company experienced a significant reduction in business in 2020, and which, despite recovery in the Company's business in 2021, has not yet reached its 2019 level. In the twelve months ended December 31, 2021 the Company’s revenue was $214,970, compared to $166,135 in the comparable period of 2020 and to $257,334 in the comparable period of 2019. While the Company expects that the adverse effect of this public health threat will be eased by global vaccination and testing and reduced restrictions on travel, it is still likely to continue to adversely impact the Company by its negative impact on the Company’s ability to generate revenue due to reduced end-market demand from IFC customers, governments and enterprises and the Company’s ability to conduct fieldwork leading to order delays and cancellations. Given the current macro-economic environment and the uncertainties regarding the potential impact of COVID-19 and its different variants on the Company’s business, there can be no assurance that Company’s estimates and assumptions used in the measurement of various assets and liabilities in the consolidated financial statements will prove to be accurate predictions of the future. If the Company’s assumptions regarding forecasted cash flows are not achieved, it is possible that an impairment review may be triggered and certain assets in the consolidated financial statements may be impaired.
COVID-19 related government assistance
Under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) the Company was eligible for a refundable Employee Retention Credit subject to certain criteria. During the year ended December 31, 2021, the Company recognized on the Company’s Consolidated Statements of Income (loss), Employee Retention Credits in the amount of $2,966 which was recorded as a reduction of $1,679 to Cost of Revenues and $1,287 to Operating Expenses. As of December 31, 2021, the Company has $952 receivable balance from the United States government related to the CARES Act, which is presented within "Other current assets" on the Company's Consolidated Balance Sheets. In addition, the Company received additional COVID-19 related credits in different territories in which it operates which were not material to the Company’s consolidated financial statements.
F - 16
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 1:-GENERAL (Cont.)
d.The Company has two major customers which accounted for 31% of revenues for the year ended December 31, 2021 (see Note 15(d)).
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"), followed on a consistent basis.
Restatement of Previously Issued Consolidated Financial Statements
In connection with the preparation of the Company’s consolidated financial statements, the Company identified misstatements related to revenues and cost of revenues in the accounting treatment of the Company's construction and operation of fiber and wireless networks in Peru for the years 2015 through 2020. The misstatements are primarily related to errors due to inaccurate interpretation during the implementation of accounting standard ASC 606 “Revenue from Contracts with Customers” (“ASC 606”) which became effective in 2018, as well as accounting for costs subject to deferral and allocation of considerations to performance obligations.
The Company evaluated the misstatements and determined that correcting the cumulative impact of the misstatements would be significant to the Company’s shareholders equity as of December 31, 2019, 2020 and 2021. However, the related impact was not material to the Company’s consolidated statements of income (loss) for the years ended December 31, 2019 and 2020, as presented in Note 17.
The Company restated its consolidated balance sheets as of December 31, 2020, consolidated statements of income (loss) and comprehensive income (loss), consolidated statement of changes in shareholders’ equity, and the consolidated statement of cash flows for the years ended December 31, 2019 and 2020, to reflect the above corrections.
The accumulated effect of the misstatements as of and for the years ended December 31, 2015 through 2018 were corrected through a decrease in the Company’s accumulated deficit opening balance as of January 1, 2019 in the consolidated statements of changes in shareholders’ equity in the amount of $16,097.
The effects of the misstatements on the Company’s net income for the years ended December 31, 2015, 2016, 2017 and 2018 were an increase of $486, $1,864, $1,277, and $4,722, respectively.
A summary of adjustments to certain previously reported financial information for comparative purposes is included in Note 17.
F - 17
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
a.Use of estimates:
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company's management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Main areas that require significant estimates and assumptions by the Company’s management include contract costs, revenues (including variable consideration, determination of contracts duration, establishing stand-alone selling price for performance obligations) and profits or losses, application of percentage-of-completion accounting, provisions for uncollectible receivables and customer claims, impairment of inventories, impairment and useful life of long-lived assets, goodwill impairment, valuation allowance in respect of deferred tax assets, uncertain tax positions, accruals for estimated liabilities, including litigation and insurance reserves, and stock-based compensation. Actual results could differ from those estimates.
b.Functional currency:
The majority of the revenues of Gilat Satellite Networks Ltd. and certain of its subsidiaries are generated in U.S. dollars ("dollar") or linked to the dollar. In addition, a substantial portion of Gilat Satellite Networks Ltd. and certain of its subsidiaries' costs are incurred in dollars. The Company's management believes that the dollar is the primary currency of the economic environment in which Gilat Satellite Networks Ltd. and certain of its subsidiaries operate. Thus, the functional and reporting currency of Gilat Satellite Networks Ltd. and certain of its subsidiaries is the dollar.
Accordingly, monetary accounts maintained in currencies other than the dollar are remeasured into dollars in accordance with ASC 830, "Foreign Currency Matters" ("ASC 830"). All transaction gains and losses of the remeasurement of monetary balance sheet items are reflected in the consolidated statements of income (loss) as financial income or expenses, as appropriate.
The financial statements of certain foreign subsidiaries, whose functional currency has been determined to be their local currency, have been translated into dollars. Assets and liabilities have been translated using the exchange rates in effect at the consolidated balance sheetsheets date. StatementsConsolidated statements of income (loss) amounts have been translated using specific rates. The resulting translation adjustments are reported as a component of shareholders' equity in accumulated other comprehensive income (loss).
F - 18
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
c.Principles of consolidation:
The consolidated financial statements include the accounts of Gilat Satellite Networks Ltd. and its subsidiaries in which the Company has a controlling voting interest and entities consolidated under the variable interest entities ("VIE") provisions of ASC 810, "Consolidation" ("ASC 810").interest. Inter-company balances and transactions have been eliminated upon consolidation.
d.Cash and Communications ("Ministry of ITC") through its "Dirección de Conectividad", or DirCon (formerly known as Compartel Program). Gilat Colombia was awarded a few projects from the Ministry of ITC, the latest of which was awarded in 2013,Cash equivalents:
Cash and was further extended several times in 2017 and 2018, and is scheduled to be completed in the second quarter of 2019.
e.Short-term and long-term restricted cash:
Short-term restricted cash is either invested in bank deposits, which mature within one year, or in short-term highly liquid investments that are restricted to withdrawals or use. As of December 31, 2018, the vast majority of this amount was linked to the dollar. Such deposits are used as collateral for performance and advance payment guarantees to customers, surety bonds and the lease of some of the Company’s offices, and bear weighted average interest rates of 2.36%0.6% and 1.23%0.21% as of December 31, 20182021 and 2017,2020, respectively.
Long-term restricted cash is primarily invested in bank deposits, which mature after more than one year. As of December 31, 2018, the amount is linked to currencies other than the dollar. It bears annual weighted average interest rates of 6.54%6% and 7.94%6.41% as of December 31, 20182021 and 2017,2020, respectively. Such deposits are used as collateral for performance guarantees to customers and the lease of some of the Company's offices.
F - 19
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in a savings bank account linked to the Colombian Peso. The restricted cash is being released based upon performance milestones as stipulated in the agreements with the Ministry of ITC (see Note 2c).
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
f.Inventories:
Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventory write-offs are provided to cover risks arising from slow-moving items, excess inventories, discontinued products, new products introduction and for market prices lower than cost. Any write-off is recognized in the consolidated statementstatements of income (loss) as cost of revenues. In addition, if required, the Company records a liability for firm non-cancelable and unconditional purchase commitments with contract manufacturers for quantities in excess of the Company's future demands forecast consistent with its valuation of excess and obsolete inventory.
Cost is determined as follows:
Raw materials, parts and supplies - using the weighted average cost method.
Work in progress and assembled raw materials - represents the cost of manufacturing with the addition of allocable indirect manufacturing costs, using the weighted average cost method.
Finished products - calculated on the basis of raw materials, direct manufacturing costs with the addition of allocable indirect manufacturing costs, using the weighted average cost method.
g.Property and equipment, net:
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets as follows:
Years | |||||
Buildings | 50 | ||||
Computers, software and electronic equipment | 2 - 10 | ||||
Office furniture and equipment | 3 - 15 | ||||
Vehicles | 3 - 7 |
Leasehold improvements are amortizeddepreciated by the straight-line method over the term of the lease or the estimated useful life of the improvements, whichever is shorter.
Rental income generated from office spaces leased to others is included in general and administrative expenses.
Network equipment leasedused to others under operating leasesprovide ongoing services is carried at cost less accumulated depreciation and depreciated using the straight-line method over the useful life of the assets of between 2 to 5 years. The Company has accounted for its assets which are under a capital lease arrangement
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in accordance with ASC 840 "Leases" ("ASC 840"thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.). Accordingly, assets under a capital lease are stated as assets of the Company on the basis of ordinary purchase prices (without the financing component), and depreciated according to the usual depreciation rates applicable to such assets. The lease payments payable in forthcoming years, net of the interest component included in them, are included in liabilities. The interest in respect of such amounts is accrued on a current basis and is charged to earnings.
h.Intangible assets:
Intangible assets subject to amortizationacquired in a business combination are initially recognized based on therecorded at fair value allocated to them at the date of acquisition, and subsequently stated at amortized cost. The assets are amortized over their estimated useful lives using the straight-line method over an estimated period during which benefits are expected to be received, in accordance with ASC 350, "Intangible - Goodwill and Other" ("ASC 350") as follows:
Years | |||||
Technology | 7.9 | ||||
Customer relationships | 6.8 | ||||
Marketing rights and patents | 12.1 |
i.Impairment of long-lived assets:
The Company's long-lived assets and identifiable intangible assets that are subject to amortization are reviewed for impairment in accordance with ASC 360, "Property, Plant and Equipment" ("ASC 360"), whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. Such measurement includes significant estimates. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. However, the carrying amount of a group of assets is not to be reduced below its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
j.Goodwill:
Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired. Under ASC 350, goodwill is not amortized, but rather is subject to an annual impairment test. Goodwill is tested for impairment at the reporting unit level by comparing the fair value of the reporting unit with its carrying value. The Company performs its annual impairment analysis of goodwill in the fourth quarter of the year and whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable.
ASC 350 allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. If the qualitative assessment does not result in a more likely than not indication of impairment, no further impairment testing is required. If it does result in a more likely than not indication of impairment, the two-step impairment test is performed. Alternatively, ASC 350 permits an entity to bypass the qualitative assessment for any reporting unit and proceed directly to performing the first step of the goodwill impairment test.
In the yearyears ended December 31, 2016,2021 and 2020, the Company performed both qualitative andpreformed quantitative assessments and concludedfollowing the outbreak of COVID-19 pandemic to continue to support its conclusion that no impairment of goodwill wasis required to be recorded.
k.Contingencies:
The Company is currently involved in various claims and legal proceedings. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
l.Revenue recognition:
The Company generates revenues mainly from the sale of products (including construction of networks), satellite-based communicationsatellite-based communications networks services and from providing connectivity, internet access and telephony services. The Company sells its products and services to enterprises, government and residential customers under large-scale contracts that utilize both the Company's networks and other networks that the Company installs, mainly based on BOT and BOO contracts. These large‑scalelarge-scale contracts sometimes involve the installation of thousands of VSATs or construction of massive fiber-optic and microwavewireless networks. Sale of products includes mainly the sale of VSATs, hubs, SSPAs, low-profile antennas, on-the-move/on-the-pause terminals, and construction and installation of large-scale networks based on BOT and BOO contracts. Sale of services includes access to and communication via satellites ("space segment"), installation of equipment, telephone services, internet services, consulting, on-line network monitoring, network maintenance and repair services. The Company sells its products primarily through its direct sales force and indirectly through resellers or system integrators. Sales consummated by the Company's sales force and sales to resellers or system integrators are considered sales to end-users.
The Company recognizes revenue when (or as) it satisfies performance obligations by transferring promised products or services to its customers in an amount that reflects the consideration the Company expects to receive. The Company applies the following five steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction pricereceive according to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. See Note 2z for additional information.
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”) basis. The Company establishes SSP based on management judgment, stand alone renewal price, considering internal factors such as margin objectives, pricing practices and historical sales.
If the consideration in thousands
Revenue from the sale of equipment is recognized at a point in time, once the customer has obtained control over the items purchased. When significant acceptance provisions are included in the arrangement, the Company deferdefers recognition of the revenue until the acceptance occurs. The Company generally does not grant a right of return to its customers. Revenue from periodic services is recognized ratably over the term the services are rendered. Revenue from other services is recognized upon their completion.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Revenues from long-term contracts under which the Company provides significant construction to the customer's specifications and networks operation and maintenance (mostly governmental projects) or long-term contracts relating to the design, development or manufacture of complex equipment or technology platforms to a buyer’s specification (or to provide services related to the performance of such contracts) are generally recognized over time because of continuous transfer of control to the customer. This continuous transfer of control to the customer is supported by clauses inbased on the contractfact that allowthe Company’s performance creates or enhances an asset that the customer to unilaterally terminatecontrols as the contract for convenience, payasset is created or enhanced, or alternatively, in some contracts, based on the fact that the Company has right to payment for costs incurred plus a reasonable profit and take control of any work in process.performance completed to date. The Company generally uses the cost-to-cost measure of progress for its contracts because it best depicts the transfer of control to the customer, which occurs as it incurs costs on the contracts. Under
At the cost-to-cost measureinception of progress,a contract, the extentCompany evaluates the products and services promised in order to determine if the contract should be separated into more than one performance obligation. The products and services provided as part of progress towards completion is measuredthe construction are not distinct from one another due to a customer defined interrelated operational performance requirement, a highly complex interrelated and integrated output and significant contract management requirements. The promises to provide operation and maintenance services are distinct performance obligations. The Company allocates the transaction price for each contract to each performance obligation identified in the contract based on the ratiorelative standalone selling price (SSP). Standalone selling prices for the Company’s products and services provided as part of costs incurredthe long-term contracts with governments are generally not observable, and consequently the Company uses the expected cost plus a reasonable margin approach to dateestimate a standalone selling price. The estimation of SSP requires the exercise of management judgement. The Company typically establishes SSP ranges for its products and services. In some governmental contracts, the Company is also required to supply tablets which are distinct and are accounted for as separate performance obligations. The Company determines SSP for tablets based on observable market data. Revenues related to tablets performance obligation are recognized at a point in time upon delivery of the tablets.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Accounting for long-term contracts involves the use of various techniques to estimate total contract revenue and performance costs. For long-term contracts, the Company estimates the profit on a contract as the difference between the total estimated transaction price and the total expected performance costs of the contract and recognizes revenue and incurred costs over the life of the contract. Changes to performance cost estimates under a contract may occur in a situation where: (a) identified contract risks cannot be resolved within the cost estimates included in a contract's estimated at completion of(“EAC”); or (b) new or unforeseen risks or changes in the performance obligation. Revenuescost estimates must be incorporated into the contract's EAC. Changes in estimated revenues and/or estimated project costs which are recorded proportionally as costsrelated to an existing performance obligation, and that are incurred. Costs to fulfill include labor, materialsnot distinct from those goods and subcontractors’ costsservices already provided, and other direct and allocated indirect costs. When estimatestherefore form part of total costs to be incurred exceed total estimates of revenue to be earned on the uncompleted contracts, a provision for the entire loss on the contract is recognizedsingle performance obligation, are recorded in the period the change is reasonably determinable, with the full amount of the inception-to-date effect of such changes recorded in such period on a "cumulative catch-up" basis. For contracts that are deemed to be loss contracts, the Company establishes forward loss reserves for total estimated costs that are in excess of total estimated consideration under a contract in the period in which they become probable. If any of the above factors were to change, or if different assumptions were used in estimating progress cost and measuring progress towards completion, it is identified.
Under the typical payment terms of government fixed-pricethe contracts under which continuous transfer of control to the customer occurs as described above, the customer pays the Company milestones-basedmilestone-based payments. Those payments are based on quantifiable measures of performance or on the achievement of specified events or milestones. Because those payments are due upon completion of those milestones, theyThis may result in revenue recognized in excess of billings and are presented as part of contract assets on the consolidated balance sheet.
Amounts recognized as revenue and which the Company has unconditional right to receive are classified as trade receivables onin the consolidated balance sheet.
A contract asset is recorded when revenue is recognized in accordance with ASC 840 upon installation or upon delivery, in cases whereadvance of the customer obtains its own or other's installation services. The net investments in sales-type leases are discounted at the interest rates implicit in the leases. The present values of payments due under sales-type lease contracts are recorded as revenue at the time of shipment or installation, as appropriate.
Deferred revenue and advances from customers are recorded when the Company receives payments from customers before performance obligations have been performed. Deferred revenue is recognized as revenue as (or when) the Company performs the performance obligation under the contract.
For additional information regarding disaggregated revenues, please refer to Note 13.15.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Company pays sales commissions to external sales agents and to sales and marketing and certain management personnel based on their attainment of certain predetermined sales goals. Sales commissions earned by its employees are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions are capitalized and amortized upon recognition of the related revenue, consistently with the transfer to the customer of the goods or services to which they relate. Amortization expenses related to these costs are mostly included in salesselling and marketing expenses in the accompanying consolidated statements of operations.
m.Selling and marketing expenses:
Selling and marketing expenses includeconsist primarily of shipping expenses inand payroll and related expenses for personnel that support the amountsCompany's selling and marketing activities. Selling and marketing costs are charged to the consolidated statements of $1,303, $1,225 and $1,367 for the years ended December 31, 2018, 2017 and 2016, respectively.
Advertising costs are expensed as incurred. Advertising expenses amounted to $247, $204,$233, $128 and $243$263 for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively.
n.Warranty costs:
Generally, the Company provides product assurance warranties for periods between twelve to twenty four months at no extra charge that coverscover the compliance of the products with agreed-upon specifications. A provision is recorded for estimated warranty costs based on the Company's experience. Warranty expenses amounted to $591, $323$470, $49 and $704$207 for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively.
Warranty provisions amounted to $1,671 and $1,594 as of December 31, 2021 and 2020, respectively.
o.Research and development expenses:
Research and development costs are charged to the consolidated statements of income (loss) as incurred and are presented net of government grants. ASC 985, "Software", requires capitalization of certain software development costs subsequent to the establishment of technological feasibility.
Based on the Company's product development process, technological feasibility is established upon completion of a working model. Costs incurred by the Company between completion of the working models and the point at which the products are ready for general release hashave been insignificant. Therefore, all research and development costs have been expensed.
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GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
p.Research and development grants:
The Company receives royalty-bearing and non-royalty-bearing grants from the Government of Israel and from other funding sources, for approved research and development projects. These grants are recognized at the time the Company is entitled to such grants on the basis of the costs incurred or milestones achieved as provided by the relevant agreement and included as a deduction from research and development expenses.
Research and development grants deducted from research and development expenses amounted to $1,426, $1,419$1,695, $1,386 and $1,624$2,024 for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively.
q.Accounting for stock-based compensation:
The Company accounts for stock-based compensation in accordance with ASC 718, "Compensation-Stock Compensation" ("ASC 718"). ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service period in the Company's consolidated statementstatements of income (loss).
The Company recognizes compensation expenses for the value of its awards, based on the straight-line method over the requisite service period of each of the awards.
The Company adopted Accounting Standards Update 2016-09, "Compensation-Stock Compensation (Topic 718)" ("ASU 2016-09") on a modified, retrospective basis. ASU 2016-09 permits entities to make an accounting policy election related to how forfeitures will impact the recognition of compensation cost for stock - based compensation: to estimate the total number of awards for which the requisite service period will not be rendered or to accountaccounts for forfeitures as they occur. Upon adoption of ASU 2016-09, the Company elected to change its accounting policy to account for forfeitures as they occur. The change was applied
r.Taxes on a modified, retrospective basis with a cumulative effect adjustment to retained earnings of $55 (which increased the accumulated deficit) as of January 1, 2017.
The Company accounts for taxes on income taxes in accordance with ASC 740, "Income Taxes" ("ASC 740"). ASC 740 prescribes the use of the liability method whereby deferred tax assets and liability account balances are determined based on differences between the financial reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that a portion or all of the deferred tax assets will not be realized.
ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Company classifies interest and penalties on taxes on income taxes as financial expenses and general and administrative expenses, respectively.
s.Concentrations of credit risks:
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term and long-term restricted cash, restricted cash held by trustees trade receivables and contract assets.
The majority of the Company's cash and cash equivalents are invested in dollars with major banks in Israel, the United States and South America. Generally, these cash and cash equivalents may be redeemed upon demand and therefore, management believes that they bear low risk.
The majority of the Company's short-term and long-term restricted cash are invested in dollars with major banks in Israel. The Company is generally entitled to receive the restricted cash based upon actual performance of its projects.
Trade receivables and contract assets of the Company are mainly derived from sales to major customers located in North, South and Central America, Europe and Asia. The Company performs ongoing credit evaluations of its customers and obtains letters of credit and bank guarantees for certain receivables. An allowance for doubtful accounts is determined with respect to specific debts that the Company has determined to be doubtful of collection.
As of December 31, 20182021 and 20172020, the Company has recorded a provisionan allowance for doubtful accountscredit losses in the amounts of $3,202$1,104 and $3,896,$1,933, respectively.
The Company has recorded a net expense (income) from bad debtsexpected credit losses in the amount of $65, ($376), $2,2313) and $6,222($26) for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively.
t.Employee related benefits:
Severance pay:
The Company's liability for severance pay for its Israeli employees is calculated pursuant to the Israeli Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment, as of the consolidated balance sheetsheets date. Employees whose employment is terminated by the Company or who are otherwise entitled to severance pay in accordance with Israeli law or labor agreements are entitled to one month's salary for each year of employment or a portion thereof. The Company's liability for all of its Israeli employees is partly provided for by monthly deposits for insurance policies and the remainder by an accrual. The value of these policies is recorded as an asset in the Company's consolidated balance sheet.sheets.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
During April and May 2008 (the "transition date"), the Company amended the contracts of most of its Israeli employees so that starting on the transition date, such employees are subject to Section 14 of the Severance Pay Law, 1963 ("Section 14") for severance pay accumulated in periods of employment subsequent to the transition date. In accordance with Section 14, upon termination, the release of the contributed amounts from the fund to the employee shallwill relieve the Company from any further severance liability and no additional payments shallwill be made by the Company to the employee. As a result, the related obligation and amounts deposited on behalf of such obligation are not stated on the consolidated balance sheet,sheets, as the Company is legally released from severance obligationobligations to employees once the amounts have been deposited and the Company has no further legal ownership of the amounts deposited.
The carrying value for the deposited funds for the Company's employees' severance pay for employment periods prior to the transition date include profits and losses accumulated up to the consolidated balance sheetsheets date. The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to the Israeli Severance Pay Law or labor agreements.
Severance pay expenses for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, amounted to $3,138, $2,819$2,877, $2,850 and $2,577,$3,162, respectively.
401(k) profit sharing plans:
The Company has a number of savings plans in the United States that qualify under Section 401(k) of the current Internal Revenue Code as a "safe harbor" plan. The Company must makemakes a mandatory contribution to the 401(k) plan to satisfy certain nondiscriminationnon-discrimination requirements under the Internal Revenue Code. This mandatory contribution is made to all eligible employees. The contribution costs for all the plans were $479, $411$545, $507 and $357$526 for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively.
u.Fair value of financial instruments:
The Company applies ASC 820, "Fair Value Measurements and Disclosures" ("ASC 820"). Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., "the exit price") in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The hierarchy is broken down into three levels based on the inputs as follows:
Level 1 -Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
Level 2 -Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3 -Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The availability of observable inputs can vary from investment to investment and is affected by a wide variety of factors, including, for example, the type of investment, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment and the investments are categorized as Level 3.
The carrying amounts of cash and cash equivalents, restricted cash, short-term deposits, trade receivables, contract assets, other current assets, trade payables, accrued expenses and other current liabilities approximate their fair value due to the short-term maturities of such instruments.
The Company measured the fair value of the forwardits hedging contracts in accordance with ASC 820 and classified them as Level 2. ForwardHedging contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.
v.Earnings per share:
In accordance with ASC 260, "Earnings per Share", basic earnings (loss) per share is computed based on the weighted average number of Ordinaryordinary shares outstanding during each period. Diluted earnings (loss) per share is computed based on the weighted average number of Ordinaryordinary shares outstanding during each period, plus dilutive potential Ordinaryordinary shares considered outstanding during the period. The total weighted average number of potential shares related to the outstanding options excluded from the calculations of diluted earnings (loss) per share, as they would have been anti-dilutive, was 573,552, 1,627,552were 3,099,144, 1,685,386 and 2,227,1501,467,849 for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
w.Derivatives and hedging activities:
ASC 815, "Derivatives and Hedging" ("ASC 815"), as amended, requires the Company to recognize all derivatives on the consolidated balance sheetsheets at fair value. Derivatives that are not hedges must be adjusted to fair value through income (loss). If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion ofGains and losses on the derivatives instruments that are designated and qualify as a derivative's changecash flow hedge are recorded in fair value is immediately recognizedaccumulated other comprehensive income (loss) and reclassified into earnings in earnings.
The Company measured the fair value of the forward and cylinder options contracts in accordance with ASC 820 (classified as Level 2).
The Company entered into forward and cylinder option contracts to hedge against part of the risk of changes in future cash flow from payments of payroll and related expenses denominated in New Israeli Shekels ("NIS").
x.Comprehensive income (loss):
The Company accounts for comprehensive income (loss) in accordance with ASC 220, "Comprehensive Income". ComprehensiveOther comprehensive income (loss) generally represents all changes in shareholders' equity during the period except those resulting from investments by, or distributions to, shareholders.shareholders and stock-based compensation of options. The CompanyCompany’s determined that its items of other comprehensive income (loss) relate to unrealized gains and losses on forwardhedging contracts and foreign currency translation adjustments.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The following tables showsshow the components of accumulated other comprehensive income (loss), as of December 31, 20182021 and 2017:2020:
December 31, 2021 | ||||||||||||
Foreign currency translation adjustments | Unrealized gains (losses) on cash flow hedges | Total | ||||||||||
| ||||||||||||
Beginning balance | $ | (6,017 | ) | $ | 0- | $ | (6,017 | ) | ||||
| ||||||||||||
Other comprehensive income (loss) before reclassifications | (348 | ) | 66 | (282 | ) | |||||||
Amounts reclassified from accumulated other comprehensive loss | 0- | (58 | ) | (58 | ) | |||||||
| ||||||||||||
Net current-period other comprehensive income (loss) | (348 | ) | 8 | (340 | ) | |||||||
| ||||||||||||
Ending balance | $ | (6,365 | ) | $ | 8 | $ | (6,357 | ) |
December 31, 2020 | ||||||||||||
Foreign currency translation adjustments | Unrealized gains (losses) on cash flow hedges | Total | ||||||||||
| ||||||||||||
Beginning balance | $ | (5,048 | ) | $ | 0- | $ | (5,048 | ) | ||||
| ||||||||||||
Other comprehensive income (loss) before reclassifications | (969 | ) | 169 | (800 | ) | |||||||
Amounts reclassified from accumulated other comprehensive loss | 0- | (169 | ) | (169 | ) | |||||||
| ||||||||||||
Net current-period other comprehensive loss | (969 | ) | 0- | (969 | ) | |||||||
| ||||||||||||
Ending balance | $ | (6,017 | ) | $ | 0- | $ | (6,017 | ) |
Year ended December 31, 2018 | ||||||||||||
Foreign currency translation adjustments | Unrealized gains (losses) on cash flow hedges | Total | ||||||||||
Beginning balance | $ | (3,217 | ) | $ | 171 | $ | (3,046 | ) | ||||
Other comprehensive loss before reclassifications | (1,845 | ) | (1,548 | ) | (3,393 | ) | ||||||
Amounts reclassified from accumulated other comprehensive income | - | 1,059 | 1,059 | |||||||||
Net current-period other comprehensive loss | (1,845 | ) | (489 | ) | (2,334 | ) | ||||||
Ending balance | $ | (5,062 | ) | $ | (318 | ) | $ | (5,380 | ) |
Year ended December 31, 2017 | ||||||||||||
Foreign currency translation adjustments | Unrealized gains (losses) on cash flow hedges | Total | ||||||||||
Beginning balance | $ | (3,122 | ) | $ | (102 | ) | $ | (3,224 | ) | |||
Other comprehensive income before reclassifications | (95 | ) | 1,419 | 1,324 | ||||||||
Amounts reclassified from accumulated other comprehensive income | - | (1,146 | ) | (1,146 | ) | |||||||
Net current-period other comprehensive income (loss) | (95 | ) | 273 | 178 | ||||||||
Ending balance | $ | (3,217 | ) | $ | 171 | $ | (3,046 | ) |
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GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
y.Leases:
1.The Company adopted ASU 2016-02, Leases (“ASC 842”) on January 1, 2018, the Company adopted Topic 6062019, using the modified retrospective method for contracts which were not completed as of January 1, 2018. Under the modified retrospective method, the Company recognized the cumulative effect of initiallyapproach, by applying the new revenue standard as an adjustment to the opening balance of accumulated deficit. This adjustment did not have a material impact on the Company’s consolidated financial statements. The Standard requires the deferral and amortization of “incremental” costs incurred to obtain a contract. The primary contract acquisition costs for the Company are sales commissions. Under Topic 605, the Company expensed sales commissions as incurred while under Topic 606 such costs will be classified as a contract asset and amortized over a period that approximates the timing of revenue recognition on the underlying contracts.
December 31, 2017 | Impact of Adoption | January 1, 2018 | ||||||||||
Condensed Consolidated Balance Sheet | ||||||||||||
Other current assets | $ | 19,415 | 2,004 | $ | 21,419 | |||||||
Accrued expenses | 75,270 | 483 | 75,753 | |||||||||
Accumulated deficit | $ | (702,959 | ) | 1,521 | $ | (701,438 | ) |
December 31, 2018 | ||||||||||||
As Reported | Impact of Adoption | Amounts under Topic 605 | ||||||||||
Condensed Consolidated Balance Sheet | ||||||||||||
Contract assets | $ | 47,760 | (1,221 | ) | $ | 46,539 | ||||||
Other current assets | 26,022 | (2,342 | ) | 23,680 | ||||||||
Accrued expenses | 67,533 | (1,023 | ) | 66,510 | ||||||||
Accumulated deficit | $ | (683,029 | ) | (2,540 | ) | $ | (685,569 | ) |
Year ended December 31, 2018 | ||||||||||||
As Reported | Impact of Adoption | Amounts under Topic 605 | ||||||||||
Condensed Consolidated Statement of Operations | ||||||||||||
Total revenues | $ | 266,391 | (1,221 | ) | $ | 265,170 | ||||||
Cost of revenues | 172,354 | - | 172,354 | |||||||||
Gross profit | 94,037 | (1,221 | ) | 92,816 | ||||||||
Operating expenses | 72,753 | (202 | ) | 72,551 | ||||||||
Operating profit | $ | 21,284 | (1,019 | ) | $ | 20,265 | ||||||
Condensed Consolidated Statement of Cash Flows | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 18,409 | (1,019 | ) | $ | 17,390 | ||||||
Increase (decrease) in accrued expenses | (7,206 | ) | (540 | ) | (6,666 | ) | ||||||
Increase (decrease) in other assets and receivables | (4,917 | ) | 338 | (4,579 | ) | |||||||
Increase (decrease) in contract assets | $ | 11,029 | 1,221 | $ | 12,250 |
December 31, | ||||||||
2018 | 2017 | |||||||
Cash and cash equivalents | $ | 67,381 | $ | 52,957 | ||||
Restricted cash | 32,305 | 29,288 | ||||||
Restricted cash held by trustees | 4,372 | 4,325 | ||||||
Long term restricted cash | 146 | 187 | ||||||
$ | 104,204 | $ | 86,757 |
The Company leases real estate and storage areas, which are all classified as operating leases. In addition to rent payments, the leases may require the Company to pay for insurance, maintenance and other operating expenses.
The Company determines if an arrangement is a lease at inception. Lease classification is governed by five criteria in ASC 842. If any of these five criteria is met, the Company classifies the lease as a finance lease. Otherwise, the Company classifies the lease as an operating lease.
Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement date to determine the present value of the lease payments. Operating lease expenses are recognized on a straight-line basis over the lease term. Exchange rate differences related to lease liabilities are recognized as incurred as financial income or expense. Several of the Company’s leases include options to extend the lease. For purposes of calculating lease liabilities, lease terms include options to extend the lease when it is reasonably certain that the Company will exercise such options. The Company’s lease agreements do not contain any material residual value guarantees.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Company's ROU assets are reviewed for impairment in accordance with ASC 360 whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The new standard requires lessors to accountalso provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases using an approachwith a term shorter than twelve months. This means that is substantially equivalent to existing guidance for sales-typethose leases, direct financing leases and operating leases. ASC 842 supersedes the previous leases standard, ASC 840, "Leases". Topic 842 becomes effective for the Company beginningdoes not recognize ROU assets or lease liabilities, but recognizes lease expenses over the lease term on a straight-line basis. The Company also elected the practical expedient to not separate lease and non-lease components for all of the Company’s leases.
2.The Company leases out equipment to several customers (see Note 9). Leases are typically classified as finance leases from the Company’s perspective as a lessor. A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee.
At the commencement date of a finance lease, the Company recognizes the net investment in the lease, as well as the selling profit and any initial direct costs for which recognition is deferred.
z.Held for sale asset:
The Company classifies an asset as held for sale when certain criteria are met. Assets classified as held for sale are expected to be sold to a third party within twelve months. When these criteria are met, the respective asset is presented separately in the consolidated balance sheets and depreciation is not recognized. Asset held for sale is measured at the lower of its carrying amount or its estimated fair value less costs to sell. See Note 4e.
aa.Short-term deposits:
Short-term deposits are deposits with maturities of more than three months but less than twelve months as of the consolidated balance sheets date. Short-term deposits are reported at fair value as of the balance sheet date.
F - 34
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
ab.Recently adopted accounting pronouncements:
On January 1, 2019.2021, the Company adopted Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): “Simplifying the Accounting for Income Taxes” (ASU 2019-12), which simplifies the accounting for income taxes. The Company expects that the adoption of the standard will have an impact of approximately $5,600 on its consolidated balance sheet for the recognition of the right-of-use assets and lease liabilities related to the Company's operating leases. The standard isdid not expected to have a material impact on Company’s consolidated financial statements during the Company's resultsyear ended December 31, 2021.
ac.Recently issued accounting pronouncements – not yet adopted:
In March 2020, the FASB issued Update ASU 2020-04 'Reference Rate Reform (Topic 848) - Facilitation of operationsthe Effects of Reference Rate Reform on Financial Reporting' which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the reference rate reform. The amendments apply only to contracts and transactions that reference LIBOR or cash flows.another reference rate expected to be discontinued as part of the reform. This ASU applies only to contracts or transactions entered into or evaluated before December 31, 2022. The Company is continuing its assessment, which may identify additional impacts this guidancecontinues to monitor what impact the discontinuance of LIBOR or another reference rate will have on its consolidated financial statementsthe Company’s contracts and disclosures.other transactions.
NOTE 3:-INVENTORIES
a.Inventories are comprised of the following:
December 31, | ||||||||
2021 | 2020 | |||||||
| ||||||||
Raw materials, parts and supplies | $ | 10,238 | $ | 9,579 | ||||
Work in progress and assembled raw materials | 15,106 | 15,871 | ||||||
Finished products | 3,088 | 5,854 | ||||||
| ||||||||
$ | 28,432 | $ | 31,304 |
b.Inventory net write-offs amounted to $3,361, $2,908 and $2,624 for the years ended December 31, 2021, 2020 and 2019, respectively.
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GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 2:4:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
a.Property and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 eliminates Step 2equipment, net consisted of the goodwill impairment test, which requires the calculation of the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Instead, an entity will compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is currently evaluating the expected impact of the standard on its consolidated financial statements.following:
December 31, | |||||||
2021 | 2020 | ||||||
Cost: | |||||||
| |||||||
Buildings and land | $ | 82,898 | $ | 91,908 | |||
Computers, software and electronic equipment | 49,822 | 54,388 | |||||
Network equipment | 31,604 | 28,212 | |||||
Office furniture and equipment | 3,573 | 3,796 | |||||
Vehicles | 235 | 205 | |||||
Leasehold improvements | 2,405 | 4,010 | |||||
| |||||||
170,537 | 182,519 | ||||||
Accumulated depreciation | 98,146 | 105,347 | |||||
| |||||||
Depreciated cost | $ | 72,391 | $ | 77,172 |
December 31, | ||||||||
2018 | 2017 | |||||||
Raw materials, parts and supplies | $ | 5,885 | $ | 7,367 | ||||
Work in progress | 10,548 | 10,300 | ||||||
Finished products | 4,676 | 11,186 | ||||||
$ | 21,109 | $ | 28,853 |
December 31, | ||||||||
2018 | 2017 | |||||||
Cost: | ||||||||
Buildings and land | $ | 92,025 | $ | 90,914 | ||||
Computers, software and electronic equipment | 50,390 | 45,119 | ||||||
Network equipment | 40,502 | 40,016 | ||||||
Office furniture and equipment | 5,317 | 5,387 | ||||||
Vehicles | 324 | 390 | ||||||
Leasehold improvements | 3,556 | 2,522 | ||||||
192,114 | 184,348 | |||||||
Accumulated depreciation | 107,711 | 102,102 | ||||||
Depreciated cost | $ | 84,403 | $ | 82,246 |
The Company recorded a reduction of |
b.Depreciation expenses amounted to $10,549, $9,850 and $10,067 for the years ended December 31, 2021, 2020 and 2019, respectively.
c.During the years ended December 31, 2020 and 2019, the Company recognized capital losses of $181 and $461, respectively, with respect to disposal of abandoned assets primarily attributed to office furniture and equipment group.
d.The Company leases part of its buildings as office spaces to others. The gross income generated from such leases amounted to approximately $5,775, $5,802 and $5,770 for the years ended December 31, 2021, 2020 and 2019, respectively. These amounts do not include the corresponding offsetting expenses related to this income.
e.During the year ended December 31, 2021, a property of the Company in Germany was classified as held for sale. As the sale is highly probable, the asset is available for immediate sale in its present condition and the sale is expected to be completed within one year.
The Company recognized an impairment of $651 in the consolidated statements of income (loss) for the year ended December 31, 2021.
f.As for pledges and securities, see Note 13c.
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GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 5:- DEFERRED REVENUE
Deferred revenue as of December 31, 2021 and 2020 was $4,787 and $10,607, respectively, and primarily relates to revenue that is recognized over time for service contracts. Approximately $7,935 out of the balance as of December 31, 2020 was recognized as revenue during the year ended December 31, 2021.
The balance of deferred revenues approximates the aggregate amount of the billed and collected amount allocated to the unsatisfied performance obligations at the end of reporting period.
The aggregate estimated amount of the transaction price allocated to performance obligations from contracts with customers that have an original expected duration of more than one year and that are unsatisfied (or partially unsatisfied) as of December 31, 2021 is approximately $393,370. Such unsatisfied performance obligations, other than for large scale governmental projects (expected to be recognized over periods of approximately 8-12 years), principally relate to contracts in which the Company committed to provide customer care services, extended warranty on equipment delivered to its customers or other services for an original period of more than one year.
The Company elected to use the exemption of not disclosing the prices allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period, that are part of contracts that have an original expected duration of one year or less.
NOTE 6:- INTANGIBLE ASSETS, NET
a.Intangible assets, net consisted of the following:
December 31, | ||||||||
2021 | 2020 | |||||||
Original amounts: | ||||||||
| ||||||||
Technology | $ | 42,504 | $ | 42,504 | ||||
Customer relationships | 4,466 | 4,466 | ||||||
Marketing rights and patents | 3,421 | 3,421 | ||||||
| ||||||||
50,391 | 50,391 | |||||||
Accumulated amortization: | ||||||||
| ||||||||
Technology | 42,403 | 42,202 | ||||||
Customer relationships | 4,466 | 4,466 | ||||||
Marketing rights and patents | 2,882 | 2,641 | ||||||
| ||||||||
49,751 | 49,309 | |||||||
| ||||||||
$ | 640 | $ | 1,082 |
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 6:- INTANGIBLE ASSETS, NET (Cont.)
b.Amortization expenses amounted to $442, $441 and $911 for the years ended December 31, 2021, 2020 and 2019, respectively.
c.Estimated amortization expenses for the following years is as follows:
Year ending December 31, | ||||
| ||||
2022 | $ | 342 | ||
2023 | 182 | |||
2024 | 116 | |||
| ||||
$ | 640 |
NOTE 7:-GOODWILL
December 31, | ||||||||
2021 | 2020 | |||||||
| ||||||||
Goodwill *) | $ | 105,647 | $ | 105,647 | ||||
Accumulated impairment losses | (62,179 | ) | (62,179 | ) | ||||
| ||||||||
$ | 43,468 | $ | 43,468 |
*) |
December 31, | ||||||||
2018 | 2017 | |||||||
Original amounts: | ||||||||
Technology | $ | 42,504 | $ | 42,504 | ||||
Customer relationships | 4,466 | 4,466 | ||||||
Marketing rights and patents | 3,421 | 3,421 | ||||||
50,391 | 50,391 | |||||||
Accumulated amortization: | ||||||||
Technology | 41,281 | 38,231 | ||||||
Customer relationships | 4,466 | 4,466 | ||||||
Marketing rights and patents | 2,210 | 1,985 | ||||||
47,957 | 44,682 | |||||||
$ | 2,434 | $ | 5,709 |
Year ending December 31, | ||||
2019 | $ | 911 | ||
2020 | 441 | |||
2021 | 431 | |||
2022 | 321 | |||
2023 and thereafter | 330 | |||
$ | 2,434 |
December 31, | ||||||||
2018 | 2017 | |||||||
Goodwill *) | $ | 105,647 | $ | 105,647 | ||||
Accumulated impairment losses | (62,179 | ) | (62,179 | ) | ||||
$ | 43,468 | $ | 43,468 |
The carrying amount of the goodwill is associated with the Mobility Solutions segment. |
NOTE 8:- 33
Year ending December 31, | ||||
2019 | $ | 1,973 | ||
2020 | 877 | |||
2021 | 593 | |||
2022 | 529 | |||
2023 | 409 | |||
$ | 4,381 |
a.Commitments with respect to space segment services:
The Company provides its customers with space segment capacity services, which are purchased from third parties. Future minimum payments due for space segment services to be rendered subsequent to December 31, 2018,2021, are as follows:
Year ending December 31, | ||||
| ||||
2022 | 6,699 | |||
2023 | 2,452 | |||
2024 | 97 | |||
| ||||
$ | 9,248 |
Year ending December 31, | ||||
2019 | $ | 8,367 | ||
2020 | 6,016 | |||
2021 | 1,587 | |||
$ | 15,970 |
Space segment services expenses during the years ended December 31, 2018, 20172021, 2020 and 20162019 were $12,771, $11,184$8,966, $10,374 and $10,278,$9,845, respectively.
F - 34
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 8:-COMMITMENTS AND CONTINGENCIES (Cont.) b.In 2021 and 2020, the Company's primary material purchase commitments were with inventory suppliers. The Company's material inventory purchase commitments are based on purchase orders, or on outstanding agreements with some of the Company's suppliers of inventory. |
c.Royalty commitments:
1.Certain of the Company’s research and development programs funded by the Israel Innovation Authority ("IIA"), formerly known as the Office of the Chief Scientist of the Ministry of Economy of the Government of Israel, are royalty bearing programs. Sales of products developed as a result of such programs are subject to payment of royalties to the IIA. The royalty payments are at a rate of 3% to 5% based on the sales of the Company, up to full repayment of 100% of the grants received from the IIA linked to the dollar plus payment of interest at a rate equal to the twelve month LIBOR. The obligation to pay these royalties is contingent upon actual sales of the products and services, and in the absence of such sales, no payment is required. In addition, the Company received grants which are non-royalty bearing. The technology developed with the funding provided by these grants (which is embodied in the Company’s products) may not be transferred, without appropriate governmental approvals. Such approvals, if granted, may involve penalties payable to the Israeli authorities as well as increased royalty payments to the Innovation Authority for royalty-bearing programs. The Company recorded income from IIA grants for the years ended December 31, 2021, 2020 and 2019 in the amount of $1,687, $1,351 and $1,518, respectively.
As of December 31, 2021, the Company had a contingent liability to pay royalties in the amount of approximately $1,408.
The Company paid immaterial royalties in the amount of $20 during the year ended December 31, 2018. The Company did not pay or accrue any amounts for such royalties during the years ended December 31, 20172021, 2020 and 2016.2019.
F - 39
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 8:-COMMITMENTS AND CONTINGENCIES (Cont.)
2.Research and development projects undertaken by the Company were partially financed by the Binational Industrial Research and Development Foundation ("BIRD Foundation"). The Company is committed to pay royalties to the BIRD Foundation at a rate of 5% of sales proceeds generating from projects for which the BIRD Foundation provided funding up to 150% of the sum financed by the BIRD Foundation.
The obligation to pay these royalties is contingent on actual sales of the products and in the absence of such sales, no payment is required.
As of December 31, 2018,2021, the Company had a contingent liability to pay royalties in the amount of approximately $253.
The Company did not pay or accrue anypaid immaterial royalties amounts for such royalties during the years ended December 31, 2018, 20172021, 2020 and 2016.
d.Litigation:
1.In 2003, the Brazilian tax authority filed a claim against the Company’s inactive subsidiary in Brazil, SPC International Ltda. (the “Brazilian Subsidiary”), for the payment of taxes allegedly due from the subsidiary.Brazilian Subsidiary. After numerous hearings and appeals at various appellate levels in Brazil, the Superior Court and the Supreme Court in February and March 2016 ruled against the subsidiaryBrazilian Subsidiary in final non-appealable decisions. Thedecisions published in June 2017. As of December 31, 2021, the total amount of this claim, including interest, penalties and legal fees is approximately $9,000,$6,423, of which approximately $1,000$724 is the principal. The Brazilian tax authorities initiated foreclosure proceedings against the subsidiaryBrazilian Subsidiary and certain of its former managers. Pursuant to the court’s decision, published in March 2016, theThe foreclosure proceedings against the former managersmanager were cancelled. The tax authorities appealed suchcancelled by court in a final and not appealable decision which appeal was rejectedissued in July 2017. This court ruling is finalWhile foreclosure and is not appealable. Basedother collection proceedings are pending against the Brazilian Subsidiary, based on Brazilian external counsel’s opinion, the Company believes that the subsidiaryBrazilian Subsidiary has solid arguments to sustain its position that further collection proceedings and inclusion of any additional co-obligors in the tax foreclosure certificate are barred due to statute of limitation and that the inclusion of any additional co-obligors in the tax foreclosure certificate should be barred due to the applicable statute of limitations and that the foreclosure procedures cannot legally be redirected to any of the Company’sother group entities and managers who were not initially cited in the foreclosure certificate.proceeding due to the passage of the statute of limitation. Accordingly, the Company believes that the chances that such redirection will lead to a loss recognition are remote.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 8:-COMMITMENTS AND CONTINGENCIES (Cont.)
2.
a.In October 2017,2014, the Company was informed that a former subcontractor that was engaged in connection with the project of Company’s Peruvian subsidiary, Gilat Colombia has To Home Peru S.A., (“GTH Peru”), initiated an arbitration proceedingproceedings in Lima against the subsidiary forMinistry of Transport and Communications of Peru, (“MTC”), and the Programa Nacional de Telecomunicaciones (“PRONATEL”). The arbitration was related to the PRONATEL projects awarded to the Company in the years 2000-2001. Under these projects, GTH Peru provided fixed public telephony services in rural areas of Peru. GTH Peru main claim was related to damages caused by the promotion of mobile telephony in such areas by the Peruvian government in the years 2011-2015. In June 2018, the arbitration tribunal issued an arbitration award ordering MTC and PRONATEL to pay GTH Peru approximately $14,000. MTC applied to the Superior Court in Lima to declare such award null and void. In July 2019, the Superior Court rejected the annulment action. MTC filed a breach of contract. The amountprotective constitutional action against such ruling. In September 2019, the 11th Constitutional Court in Lima rejected MTC’s action declaring it inadmissible. MTC appealed the resolution. Recently, the Court confirmed the appealed resolution. This resolution has not been formally served yet. In parallel, in July 2019, the Company has initiated proceedings at the 17th Civil Chamber specialized in Commercial Matters of the claimSuperior Court of Justice of Lima for enforcement of the arbitration award. Based on the advice of counsel, such proceedings are expected to continue for five years or more. MTC’s objection to the enforcement proceedings was denied. MTC and PRONATEL should now file a schedule for payment in installments.
b.In October 2019, GTH Peru initiated additional arbitration proceedings against MTC and PRONATEL based on similar grounds for the years 2015-2019. Evidentiary Hearings took place in August and October 2021. In February 2022, the parties submitted their closing arguments. The final hearing took place on March 23, 2022. It is pending that the Tribunal issues a decision closing the proceeding and setting the term in which the award should be rendered.
3.In 2018, Gilat Networks Peru S.A. (“GNP”), the Company’s subsidiary in Peru, won a government bid for two additional regional projects in the Amazonas and Ica regions in Peru for PRONATEL with a contractual value of approximately $6,600. In July 2018$154,000. GMC Engineering Solutions and SATEL Comunicaciones y Datos, two of the three entities comprising the losing bidder consortium, applied to the superior court in Lima to cancel the bid and obtained a preliminary injunction against the award. Although the lawsuit did not name GNP as a defendant, the subsidiary was served as an interested third party in the process and filed its responseobjection and a counterclaim against the subcontractor. The amount of the counter claim is approximately $7,900 plus interest. The arbitration is currently pending the counter parties’ filing their response.defenses. Currently, following PRONATEL’s request, GNP continues performing these projects. Based on legalthe advice of counsel, the Company believes that it has made adequate accruals relatingthe chances of success of the proceedings seeking to this proceeding.
4.The Company is also in the midst of different stages of audits and disputes with various tax authorities in different parts of the world. Further, the Company is the defendant in various other lawsuits, including employment-related litigation claims and may be subject to other legal proceedings in the normal course of its business. While the Company intends to defend the aforementioned matters vigorously, it believes that a loss in excess of its accrued liability with respect to these claims is not probable.
F - 36
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 8:-COMMITMENTS AND CONTINGENCIES (Cont.)
e.Pledges and securities, see Note 13c.
f.Guarantees:
The Company guarantees its performance to certain customers through bank guarantees, surety bonds from insurance companies and corporate guarantees. Guarantees are often required for the Company's performance during the installation and operational periods. The guarantees typically expire when certain operational milestones are met.
As of December 31, 2018,2021, the aggregate amount of bank guarantees and surety bonds from insurance companies outstanding in order to secure the Company's various obligations was $149,523,$91,111, including an aggregate of $136,003$86,875 on behalf of its subsidiaries in Peru. TheIn order to secure these guarantees the Company provided a floating charge on its assets as well as other pledges, including a fixed pledge, on certain assets and property. In addition, the Company has $32,451$1,164 of restricted cash to secure these guarantees.
Under the arrangements with certain banks, the Company is required to observe certain conditions, and under the arrangements with other banks the Company is required to satisfy certain conditions and financial covenants. As of December 31, 2021, the Company is in compliance with these conditions and covenants. The Company has provided these banks with various pledges as collateral for the guarantees. Company’s credit and guarantee agreements also contain various restrictions and limitations that may impact the Company. These restrictions and limitations relate to incurrence of indebtedness, contingent obligations, negative pledges, liens, mergers and acquisitions, change of control, asset sales, dividends and distributions, redemption or repurchase of equity interests and certain debt payments. The agreements also stipulate a floating charge on Company’s assets to secure the fulfillment of Company’s obligations to banks as well as other pledges, including a fixed pledge, on certain assets and property.
In accordance with ASC 460, "Guarantees" ("ASC 460"), as the guarantees above are performance guarantees for the Company's own performance, such guarantees are excluded from the scope of ASC 460. The Company has not recorded any liability for such amounts, since the Company expects that its performance will be acceptable. To date, no guarantees have ever been exercised against the Company.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 9:- LEASES
1.The Company's subsidiaries entered into various non-cancelable operating lease agreements for certain of their offices and facilities, expiring between 2022 and 2027. Components of operating lease expense were as follows:
Year ended December 31, | |||||||||||
2021 | 2020 | 2019 | |||||||||
| |||||||||||
Operating lease expenses*) | $ | 2,167 | $ | 2,139 | $ | 2,196 | |||||
Short-term lease expenses | 224 | 222 | 272 | ||||||||
Total lease expenses | $ | 2,391 | $ | 2,361 | $ | 2,468 |
*) | Operating lease expenses were mainly paid in cash during the year ended December 31, 2021. |
As of December 31, 2021 and 2020, the Company’s operating leases had a weighted average remaining lease term of 2.55 and 3.2 years, respectively, and a weighted average discount rate of 4.5%.
Future lease payments under operating leases as of December 31, 2021 were as follows:
2022 | $ | 1,830 | ||
2023 | 1,415 | |||
2024 | 963 | |||
2025 | 73 | |||
Thereafter | 9 | |||
Total future lease payments | 4,290 | |||
Less imputed interest | (189 | ) | ||
Total lease liability balance | $ | 4,101 |
2.During the years ended December 31, 2021 and 2020, the Company has leased equipment to several customers.
The following table detailsCompany recorded profit at lease commencement for the years ended December 31, 2021 and 2020 in the amount of $2,565 and $288, respectively.
As of December 31, 2021 and 2020, Company’s lease receivables balances are immaterial as the major amount was paid in-advance. Therefore, the maturity analysis of lease receivables, showing the undiscounted lease payments to be received after the reporting date, is immaterial.
F - 43
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 10:- DERIVATIVE INSTRUMENTS
The Company has entered into several foreign currency hedging contracts to protect against changes in value of forecasted foreign currency cash flows resulting from salaries and related payments that are denominated in NIS. These contracts were designated as cash flow hedges, as defined by ASC 815, as amended, are considered highly effective as hedges of these expenses and generally mature within twelve months.
The Company recognized income (loss) related to derivative instruments, within payroll expenses in the consolidated statements of income (loss) of ($125), $350 and $335 for the years ended December 31, 2021, 2020 and 2019, respectively.
The fair value of derivative instruments in the consolidated balance sheet:
Fair value of derivative instruments | |||||||||
December 31, | |||||||||
2018 | 2017 | ||||||||
Derivative: | |||||||||
Foreign exchange forward contracts / options (1) | Other current assets (liabilities) | $ | (320 | ) | $ | 170 |
The estimated net income (loss) related to the effective portion of its hedging instruments. The effective portionamount of the hedged instruments has been includedexisting profits that are reported in accumulated other comprehensive loss as an offset (addition) of payroll expenses and other operating expenses in theDecember 31, 2021 that is expected to be reclassified into consolidated statement of income (loss) amountedwithin the next twelve months is $8.
NOTE 11:- SHAREHOLDERS' EQUITY
a.Share capital:
Ordinary shares confer upon their holders voting rights, the right to $(1,056), $1,114receive cash dividends and $393the right to share in the years ended December 31, 2018, 2017 and 2016, respectively
b.Stock option plans:
Description of plans
In October 2008, the compensation stock option committee of the Company's Board of Directors approved the adoption of the 2008 Stock Incentive Plan (the "2008 Plan") with 1,000,000 shares or stock options available for grant and a sub-plan to enable qualified optionees certain tax benefits under the Israeli Income Tax Ordinance. Among the incentives that may be adopted are stock options, performance share awards, performance share unit awards, restricted shares, restricted share unitRSUs awards and other stock-based awards. During the years commencing in 2010 and through December 31, 2018,2021, the Company's Board of Directors approved, in the aggregate, an increase of 5,104,0007,673,862 shares to the number of shares available for grant under the 2008 Plan, bringing the total amountnumber of shares available for grant to 6,104,000.8,673,862. As of December 31, 2018,2021, an aggregate of 128,888145,000 shares are still available for future grants under the 2008 Plan. After the end of the reporting period, on February 14, 2022 the Company's Board of Directors approved an increase of 472,500 shares to the number of shares available for grant under the Company's 2008 Share Incentive Plan.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 11:- SHAREHOLDERS' EQUITY (Cont.)
Options granted under the 2008 Plan vest quarterly over twothree to four years or 50% at the second anniversary and 25% at the third and fourth anniversary. TheGenerally, the options expire after six seven or ten years from the date of grant. Restricted share units (“RSUs”) granted under the 2008 Plan vest quarterly or annually over four years. Any options, or RSUs, which are forfeited or canceled before expiration of the 2008 Plan, become available for future grants.
All options granted by the Company on or before March 23, 2017 that are unvested and remain outstanding shall become fully vested upon change of control. In addition, options granted to several management members after such date that are unvested and remain outstanding shall also become fully vested upon change of control.
In February 2019, the 2008 Plan was amended to include a dividend adjustment, whereby unless otherwise is resolved by the Board of Directors, the exercise price of each outstanding share option (whether vested or not) (as such term is defined in thousands
Valuation assumptions:
The Company selected the Black-Scholes-Merton option-pricing model as the most appropriate fair value method for its stock options awards and the fair value of RSUs is based on the market stock price on the date of grant.awards. The option-pricing model requires a number of assumptions, of which the most significant are the expected stock price volatility and the expected option term. Expected volatility was calculated based upon actual historical stock price movements. The expected term of options granted is based upon historical experience and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. TheIn April 2019 the Company has historically not paid dividends. The Company’s Boarddistributed a cash dividend for the first time in the amount of directors declared on$24,864 or $0.45 per share. In December 2020 the date of this annual reportCompany distributed a cash dividend in the amount of $0.45$19,999 or $0.36 per share (or approximately $25,000) to be paid and in April 2019 (for whichJanuary 2021 the Company distributed a cash dividend in the amount of $35,003 or $0.63 per share. For all of the above a protective adjustment iswas applied to the outstanding equity awards). This will be the first time the Company pays dividend.awards. However, the Company has not adopted a general policy regarding the distribution of dividends and makes no statements as to the distribution of dividends in the foreseeable future.For additional information see Note 15.
F - 45
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 11:- SHAREHOLDERS' EQUITY (Cont.)
Options granted to employees:
The fair value of the Company's stock options granted to employees for the years ended December 31, 2018, 20172021, 2020 and 20162019 was estimated using the following weighted average assumptions:
Year ended December 31, | ||||||
2021 | 2020 | 2019 | ||||
| ||||||
Risk free interest | 0.26%-1.14% | 0- | 1.35%-2.51% | |||
Dividend yields | 0% | 0- | 0% | |||
Volatility | 41.09%-50.62% | 0- | 33.35%-34.32% | |||
Expected term (in years) | 4.00-4.04 | - | 4.22-4.26 |
Year ended December 31, | ||||||
2018 | 2017 | 2016 | ||||
Risk free interest | 2.48%-2.82% | 1.66%-2.00% | 1.08%-1.62% | |||
Dividend yields | 0% | 0% | 0% | |||
Volatility | 33% | 33% | 33%-35% | |||
Expected term (in years) | 4.3-4.39 | 4.52 | 4.8 |
A summary of employee option balances under the 2008 Plan as of December 31, 20182021 and changes during the year then ended are as follows:
Number of options | Weighted-average exercise price *) | Weighted- average remaining contractual term (in years) | Aggregate intrinsic value (in thousands) *) | |||||||||||||
| ||||||||||||||||
Outstanding at January 1, 2021 | 2,776,778 | $ | 6.1 | 3.0 | $ | 4,142 | ||||||||||
| ||||||||||||||||
Granted | 2,422,500 | $ | 8.1 | |||||||||||||
Exercised | (1,391,384 | ) | $ | 4.6 | ||||||||||||
Forfeited and cancelled | (708,750 | ) | $ | 8.0 | ||||||||||||
| ||||||||||||||||
Outstanding as of December 31, 2021 | 3,099,144 | $ | 7.8 | 4.5 | $ | 1,737 | ||||||||||
| ||||||||||||||||
Exercisable as of December 31, 2021 | 434,769 | $ | 6.4 | 2.3 | $ | 504 |
Number of options | Weighted-average exercise price | Weighted- average remaining contractual term (in years) | Aggregate intrinsic value (in thousands) | |||||||||||||
Outstanding at January 1, 2018 | 2,808,000 | $ | 5.2 | |||||||||||||
Granted | 740,000 | $ | 8.2 | |||||||||||||
Exercised | (438,840 | ) | $ | 4.9 | ||||||||||||
Forfeited | (225,750 | ) | $ | 5.3 | ||||||||||||
Outstanding at December 31, 2018 | 2,883,410 | $ | 6.0 | 3.7 | $ | 9,087 | ||||||||||
Exercisable at December 31, 2018 | 1,209,910 | $ | 5.2 | 2.6 | $ | 4,804 |
*) In January 2021 the Company distributed a cash dividend in thousands
The weighted-average grant-date fair value of options granted to employees during the years ended December 31, 2021 and 2019 were $2.72 and $2.6, respectively. During the year ended December 31, 2018 was $2.3.2020 no new options were granted. The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company's closing stock price on the last trading day of the year 2018 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2018.that date. These amounts change based on the fair market value of the Company's stock. Total intrinsic value of options exercised for the year ended December 31, 20182021 was $1,789.$14,318.
F - 46
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 11:- SHAREHOLDERS' EQUITY (Cont.)
The outstanding and exercisable options granted to employees under the 2008 Plan as of December 31, 2018,2021, have been separated into ranges of exercise price as follows:
Ranges of exercise price | Options outstanding as of December 31, 2021 | Weighted average remaining contractual life (in years) | Weighted average exercise price | Options exercisable as of December 31, 2021 | Weighted average exercise price of exercisable options | |||||||||||||||
| ||||||||||||||||||||
$3.51-5.07 | 137,893 | 0.7 | $ | 3.8 | 137,893 | 3.8 | ||||||||||||||
$6.22-8.52 | 2,161,251 | 4.5 | $ | 6.7 | 296,876 | 7.6 | ||||||||||||||
$9.92-11.92 | 800,000 | 5.3 | $ | 11.5 | 0- | 0- | ||||||||||||||
| ||||||||||||||||||||
3,099,144 | 4.5 | $ | 7.8 | 434,769 | 6.4 |
Options | Weighted | Options | Weighted | |||||||||||||||||
outstanding | average | Weighted | exercisable | average exercise | ||||||||||||||||
Ranges of | as of | remaining | average | as of | price of | |||||||||||||||
exercise | December 31, | contractual | exercise | December 31, | exercisable | |||||||||||||||
price | 2018 | life (years) | price | 2018 | options | |||||||||||||||
$3.77-5.63 | 1,773,410 | 3.1 | $ | 5.0 | 1,060,660 | 5.0 | ||||||||||||||
$5.86-8.14 | 925,000 | 4.4 | $ | 7.3 | 149,250 | 6.7 | ||||||||||||||
$9.34 | 185,000 | 5.6 | $ | 9.3 | - | |||||||||||||||
2,883,410 | 3.7 | $ | 6.0 | 1,209,910 | 5.2 |
Additional stock-based compensation data:
As of December 31, 2018,2021, there was $2,254$5,644 of unrecognized compensation costs related to non-vested stock-based compensation arrangements granted to employees under the 2008 Plan. The cost related to employees is expected to be recognized over a weighted-average period of 2.783.24 years.
During the year ended December 31, 2021, 2020 and 2019 the stock-based compensation for options were recognized in the consolidated statement of income (loss) in the following line items:
Year ended December 31, | |||||||||
2021 | 2020 | 2019 | |||||||
| |||||||||
Cost of revenues of products | $ | 137 | $ | 82 | $ | 138 | |||
Cost of revenues of services | 140 | 84 | 120 | ||||||
Research and development, net | 304 | 279 | 280 | ||||||
Selling and marketing | 422 | 287 | 448 | ||||||
General and administrative | 301 | 550 | 1,149 | ||||||
$ | 1,304 | $ | 1,282 | $ | 2,135 |
c.Dividends:
1.In the event that cash dividends are declared by the Company, such dividends will be declared and paid in Israeli currency. Under current Israeli regulations, any cash dividend paid in Israeli currency in respect of ordinary shares purchased by non-residents of Israel with non-Israeli currency, may be freely repatriated in such non-Israeli currency, at the exchange rate prevailing at the time of repatriation.
2.In April 2019, the Company distributed a cash dividend for the first time, in the amount of $24,864 or $0.45 per share.
F - 40
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 11:- SHAREHOLDERS' EQUITY (Cont.)
In December 2020 the Company distributed a cash dividend, in the amount of $19,999 or $0.36 per share and in January 2021, the Company distributed a cash dividend in the amount of $35,003 or $0.63. However, the Company has not adopted a general policy regarding the distribution of dividends and makes no statements as to the distribution of dividends in the foreseeable future.
3.Pursuant to the terms of a bank agreement, the Company is restricted from paying cash dividends to its shareholders without initial approval from the bank; which was received for all of the above mentioned dividends.
NOTE 12:- TAXES ON INCOME
a.Israeli taxation:
1.Corporate tax rates:
Generally, income of Israeli companies is subject to corporate tax. The corporate tax rate in Israel is 23% in 2018, compared with 24% in 20172021, 2020 and 25% in 2016.
2.Tax benefits under the Law for the Encouragement of Capital Investments, 1959 (the "Law"):
The Company has been granted an "Approved Enterprise" status, under the Law, for nine investment programs in the alternative program, by the Israeli Government.
Certain production facilities of the Company have been granted "Benefitted Enterprise"'Benefitted Enterprise' status under the provision of the Law. TheSince the Company was eligible under the terms of minimum qualifying investment and elected 2011 as the Year of Election.
Income derived from Approved Enterprise or Benefitted EnterprisesEnterprise is tax exempt for a period of two years out of the period of benefits. Based on the percentage of foreign shareholding in the Company, income derived during the remaining years of benefits is taxable at the rate of 10%-25%.
The period of benefits of the Benefitted Enterprises under the 2011 election will expire in 2023.2023. As of December 31, 2018,2021, the Company did not generate income from the Benefitted Enterprises.
In the event of distribution of dividends from the above mentioned tax exempt income, the amount distributed would be taxed at a corporate tax rate of 10% to 25%, depending on the level of foreign investment in the Company. Dividends distributed from taxable income accrued during the period of benefits of Approved Enterprise are taxable at a rate of 15%. Dividends distributed from taxable income accrued during the period of benefits of a Benefitted Enterprise, are taxable at the rate of 15%, if the dividend is distributed during the tax benefit period, or within an additional 12 years after the lapse of that period.
Income from sources other than a "Benefitted Enterprise" during the benefit period is subject to tax at the regular corporate tax rate (25%(23% in 2016, 24%2021, 2020 and 2019).
F - 48
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in 2017 and 23% in 2018).
NOTE 12:- TAXES ON INCOME (Cont.)
On January 1, 2011, new legislation that constitutes a major amendment to the Law was enacted (the "Amendment Legislation"). Under the Amendment Legislation, a uniform rate of corporate tax would apply to all qualified income of certain industrial companies, as opposed to the current law's incentives that are limited to income from "Benefitted Enterprises" during their benefits period. According to the Amendment Legislation, the applicable tax rate for 2014 and onwards is set at 9% in geographical areas in Israel designated as Development Zone A and 16% elsewhere in Israel applicable to the company.Israel. The profits of these Industrial Companies would be freely distributable as dividends, subject to a 20% withholding tax (or lower, under an applicable tax treaty). The Company is not located in Development Zone A.
Under the transitory provisions of the Amendment Legislation, the Company may elect whether to irrevocably implement the new law in its Israeli company while waiving benefits provided under the current law or keep implementing the current law during the next years. Changing from the current law to the new law is permissible at any stage.
Amendment alsofrom December 2016 prescribes special tax tracks for technological enterprises.
Technological preferred enterprise - an enterprise for which total consolidated revenues of its parent company and all subsidiaries are less than NIS 10 billion. A technological preferred enterprise, as defined in the Law, which is located in the center of Israel will be subject to tax at a rate of 12% on profits deriving from intellectual property (in Development Zone A- a tax rate of 7.5%).
3.On November 15, 2021, the Israeli Parliament released its parent company2021-2022 Budget Law (“2021 Budget Law”). The 2021 Budget Law introduces a new dividend ordering rule that apportions every dividend between previously tax-exempt (“Trapped Earnings”) and all subsidiaries exceed NIS 10 billion. Such enterprise will be subject to tax at a rate of 6% on profits deriving from intellectual property, regardlesspreviously taxed income. Consequently, distributions (including deemed distributions as per Section 51(h)/51B of the enterprise's geographical location.
In parallel, the 2021 Budget Law also includes a temporary order to enhance the release of Trapped Earnings by reducing the claw-back income tax rate that is applicable upon such a release or distribution by up to 60%, as definedbut not less than 6% income tax rate, during a one-year period beginning November 15, 2021.
4.In 2021, the Company settled the 2016-2019 income tax assessment with the Israeli tax authorities, recognizing $1,765 taxes on income. No further taxes are due in the Law, deriving from income from the technological enterprises will be subjectrelation to tax at a rate of 4%.
F - 42
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 12:- TAXES ON INCOME (Cont.)
b.Taxes on income on non-Israeli subsidiaries:
Non-Israeli subsidiaries are taxed according to the tax laws in their respective domiciles of residence. The Company has not made any provisions relating to undistributed earnings of the Company's foreign subsidiaries since the Company has no current plans to distribute such earnings. If earnings are distributed to Israel in the form of dividends or otherwise, the Company may be subject to additional Israeli taxes on income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes. As of December 31, 2018,2021, the amount of undistributed earnings of non-Israeli subsidiaries, which is considered indefinitely reinvested, was $3,134$3,842 with a corresponding unrecognized deferred tax liability of $398.
In December 2017, the U.S. enacted significant tax reform through the U.S. Tax Cuts & Jobs Acts (“TCJA”). The TCJA enacted significant changes affecting the year ended December 31, 2017, including, but not limited to, (1) reducing the U.S. federal corporate income tax rate from 35% to 21% effective 2018, and (2) imposing a one-time Transition Tax on certain unrepatriated earnings of foreign subsidiaries of U.S. companies that had not been previously taxed in the U.S.
c.Carryforward tax provisions affecting 2018, including, but not limited to, (1) creating a new provision designed to tax global intangible low-tax income (“GILTI”); (2) generally eliminating U.S. federal taxes on dividends from foreign subsidiaries; (3) eliminating the corporate alternative minimum tax (“AMT”); (4) creating the base erosion anti-abuse tax (“BEAT”); (5) establishing a deduction for foreign derived intangible income ("FDII"); (6) repealing the domestic production activity deduction;losses and (7) establishing new limitations on deductible interest expense and certain executive compensation.
As of December 31, 2018, the Company has completed the accounting for all the impacts of the TCJA with no material adjustments to the provisional amounts recorded as of December 31, 2017.
As of December 31,2021, the Company had capital loss carryforwards for Israeli tax purposes of approximately $568,100 which may be offset indefinitely against future capital gains. the Company doesn’t expect future utilization of such carry forwards losses and accordingly records full valuation allowance.
As of December 31, 2018,2021, the Company's U.S. subsidiary had approximately $8,600$10,242 of carryforward tax losses for state tax purposes. The U.S subsidiary had R&D credits carryforwards for federal tax purposes $11,400of approximately $3,614 and for state tax purposes and R&D credits carryforwards of approximately $5,700. These U.S. net operating losses can be utilized within 20 years and may be subject to substantial annual limitation due to the "change in ownership" provisions of Internal Revenue Code of 1986 and similar state provisions. These annual limitations may result in the expiration of net operating loss before utilization.
The Company has carryforward tax losses relating to other subsidiaries in Europe and Latin America of approximately $41,400$41,406 (which can be utilized within 9 years)indefinitely) and $30,000$31,184 ($18,90024,139 can be utilized within 4 years and $11,100$7,045 can be utilized indefinitely), as of December 31, 20182021, respectively.
F - 50
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 12:- TAXES ON INCOME (Cont.)
d.Deferred incometaxes:
Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.purposes and carryforward tax losses and credits. Significant components of the Company's deferred tax liabilities and assets are as follows:
December 31, | ||||||||||
2021 | 2020 | |||||||||
1. | Provided in respect of the following: | |||||||||
|
| |||||||||
Gross deferred tax assets: | ||||||||||
Carryforward tax losses and credits *) **) | $ | 41,158 | $ | 38,937 | ||||||
Property, equipment and intangibles | 802 | 1,004 | ||||||||
Inventory accrual | 1,555 | 1,173 | ||||||||
Vacation accrual | 1,132 | 1,103 | ||||||||
Supplementary tax advances | 969 | 2,489 | ||||||||
Deferred revenues | 446 | 567 | ||||||||
Research and development costs | 1,227 | 297 | ||||||||
Other temporary differences | 2,603 | 2,568 | ||||||||
|
| |||||||||
Gross deferred tax assets | 49,892 | 48,138 | ||||||||
|
| |||||||||
Valuation allowance | (27,952 | ) | (25,476 | ) | ||||||
|
| |||||||||
Net deferred tax assets | 21,940 | 22,662 | ||||||||
|
| |||||||||
Gross deferred tax liabilities | ||||||||||
Property and equipment | (3,748 | ) | (3,367 | ) | ||||||
Other temporary differences | (641 | ) | 0- | |||||||
|
| |||||||||
Gross deferred tax liabilities | (4,389 | ) | (3,367 | ) | ||||||
|
| |||||||||
Net deferred tax assets | $ | 17,551 | $ | 19,295 |
*) | The amounts are shown after reduction for unrecognized tax benefits of $5,494 and $4,197 as of December 31, 2021 and 2020, respectively. | ||
**) | Excluding capital losses carryforwards, which are not part of the Company’s on-going business, and for which the Company records full valuation allowance. |
December 31, | |||||||||
2018 | 2017 | ||||||||
1. | Provided in respect of the following: | ||||||||
Carryforward tax losses and credits *) | $ | 41,561 | $ | 38,918 | |||||
Property, equipment and intangibles | 904 | 1,484 | |||||||
Deferred revenues | 823 | 2,224 | |||||||
Research and development costs | 804 | 1,716 | |||||||
Other | 7,202 | 7,435 | |||||||
Gross deferred tax assets | 51,294 | 51,777 | |||||||
Valuation allowance | (40,943 | ) | (44,882 | ) | |||||
Net deferred tax assets | 10,351 | 6,895 | |||||||
Gross deferred tax liabilities | |||||||||
Property, equipment and intangibles | (3,208 | ) | (3,098 | ) | |||||
Subsidy income | (3,574 | ) | (3,093 | ) | |||||
Other | (22 | ) | (829 | ) | |||||
Gross deferred tax liabilities | (6,804 | ) | (7,020 | ) | |||||
Net deferred tax assets (liabilities) | $ | 3,547 | $ | (125 | ) | ||||
*) The amounts are shown after reduction for unrecognized tax benefits of $ 1,989 as of December 31, 2018. | |||||||||
2. | Deferred taxes are included in the consolidated balance sheets, as follows: | ||||||||
Long term assets | $ | 4,127 | $ | 861 | |||||
Long term liabilities | $ | (580 | ) | $ | (986 | ) |
F - 44
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 12:- TAXES ON INCOME (Cont.)
December 31, | ||||||||||
2021 | 2020 | |||||||||
2. | Deferred taxes are included in the consolidated balance sheets, as follows: | |||||||||
| ||||||||||
Long-term assets | $ | 17,551 | $ | 19,295 |
3.The Peruvian government awarded GNP, the Company's subsidiary in Peru, the Regional PRONATEL Projects under six separate bids for the construction of fiber and wireless networks, operation of the networks for a defined period and their transfer to the government. The income derived from the construction of the project is an exempt subsidy, and therefore a significant uncertainty arises about GNP’s eligibility to deduct certain construction costs incurred in generating the exempt income against future taxable income. Accordingly, as of December 31, 2021 and 2020, the Company did not record deferred taxes to reflect the total net tax effects of such potential temporary differences.
4.During the year ended December 31, 2021, the Company increased valuation allowance by $2,476, resulting mainly from changes relating to carryforward tax losses. The Company provided valuation allowance for a portion of the deferred taxes regarding the carryforward losses and other temporary differences that management believes are not expected to be realized in the foreseeable future.
During the year ended December 31, 2019, the Company released valuation allowance against the deferred tax assets primarily related to carryforward income tax losses in Israel..
5.The functional and reporting currency of the Company and most of its subsidiaries is the U.S. dollar. The difference between the annual changes in the NIS/Dollar exchange rate causes a further difference between taxable income and the income before taxes on income shown in the consolidated financial statements. In accordance with ASC 740, the Company has not provided deferred taxes on the difference between the functional currency and the tax basis of assets and liabilities.
F - 45
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 12:- TAXES ON INCOME (Cont.)
e.Reconciling items between the statutory tax rate of the Company and the actual taxes on income (tax benefit):
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
As Restated (1) | ||||||||||||
| ||||||||||||
Income before taxes on income (tax benefit), as reported in the consolidated statements of income (loss) | $ | 459 | $ | 35,869 | $ | 23,275 | ||||||
| ||||||||||||
Statutory tax rate | 23.0 | % | 23.0 | % | 23.0 | % | ||||||
| ||||||||||||
Theoretical taxes on income | $ | 105 | $ | 8,250 | $ | 5,353 | ||||||
Currency differences | 129 | (7 | ) | (1,908 | ) | |||||||
Tax adjustment in respect of different tax rates and "Benefitted Enterprise" status | (968 | ) | (1,204 | ) | 241 | |||||||
Changes in valuation allowance | 2,476 | (1,217 | ) | (14,248 | ) | |||||||
Capital (gain) loss from merger, acquisition and related litigation expense, net | 0- | (7,749 | ) | 18 | ||||||||
Expiration of carryforward tax losses | 1,032 | 1,367 | 923 | |||||||||
Exempt subsidy income | (3,093 | ) | (1,497 | ) | (3,887 | ) | ||||||
Nondeductible expenses and other differences | 3,811 | 2,850 | (75 | ) | ||||||||
| ||||||||||||
$ | 3,492 | $ | 793 | $ | (13,583 | ) |
(1) The Company restated previously issued consolidated financial statements. See Note 2 and Note 17 for additional information.
f.Taxes on income (tax benefit) included in the consolidated statements of income (loss):
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
| ||||||||||||
Current | $ | 1,140 | $ | 808 | $ | 1,300 | ||||||
Deferred | 2,352 | (15 | ) | (14,883 | ) | |||||||
| ||||||||||||
$ | 3,492 | $ | 793 | $ | (13,583 | ) |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Income (loss) before taxes on income from continuing operations , as reported in the consolidated statements of income (loss) | $ | 16,986 | $ | 6,554 | $ | (4,088 | ) | |||||
Statutory tax rate | 23.0 | % | 24.0 | % | 25.0 | % | ||||||
Theoretical taxes on income (tax benefit) | $ | 3,907 | $ | 1,573 | $ | (1,022 | ) | |||||
Currency differences | 3,089 | (3,225 | ) | (2,174 | ) | |||||||
Tax adjustment in respect of different tax rates and "Benefitted Enterprise" status | 345 | 2,849 | (5,580 | ) | ||||||||
Changes in valuation allowance | (3,939 | ) | (3,343 | ) | 11,832 | |||||||
Loss from liquidation of subsidiaries *) | (8,930 | ) | - | - | ||||||||
Forfeiture of carryforward tax losses | - | 622 | 261 | |||||||||
Exempt subsidy income (loss) | 394 | (2,646 | ) | (4,224 | ) | |||||||
U.S. Tax Cuts and Jobs Acts effect | 56 | 2,138 | - | |||||||||
Nondeductible expenses and other differences | 3,655 | 1,785 | 2,159 | |||||||||
$ | (1,423 | ) | $ | (247 | ) | $ | 1,252 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Current | $ | 2,249 | $ | (436 | ) | $ | 1,248 | |||||
Deferred | (3,672 | ) | 189 | 4 | ||||||||
$ | (1,423 | ) | $ | (247 | ) | $ | 1,252 | |||||
Domestic | $ | 610 | $ | 768 | $ | 555 | ||||||
Foreign | (2,033 | ) | (1,015 | ) | 697 | |||||||
$ | (1,423 | ) | $ | (247 | ) | $ | 1,252 |
F - 46
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 12:- TAXES ON INCOME (Cont.)
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
| ||||||||||||
Domestic | $ | 2,719 | $ | 325 | $ | (14,472 | ) | |||||
Foreign | 773 | 468 | 889 | |||||||||
| ||||||||||||
$ | 3,492 | $ | 793 | $ | (13,583 | ) |
g.Income (loss) before taxes on income (tax benefit):
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
| As Restated (1) | |||||||||||
Domestic | $ | (5,537 | ) | $ | 44,387 | $ | 12,851 | |||||
Foreign | 5,996 | (8,518 | ) | 10,424 | ||||||||
| ||||||||||||
$ | 459 | $ | 35,869 | $ | 23,275 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Domestic | $ | 6,596 | $ | 1,289 | $ | (8,056 | ) | |||||
Foreign | 10,390 | 5,265 | 3,968 | |||||||||
$ | 16,986 | $ | 6,554 | $ | (4,088 | ) |
(1) The Company restated previously issued consolidated financial statements. See Note 2 and Note 17 for additional information.
h.Unrecognized tax benefits:
A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows:
December 31, | ||||||||
2021 | 2020 | |||||||
| ||||||||
Balance at beginning of year | $ | 4,477 | $ | 3,190 | ||||
Increase (decrease) in tax positions for prior years, net | 63 | (72 | ) | |||||
Increase in tax positions for current year | 1,330 | 1,359 | ||||||
| ||||||||
Balance at the end of year *) | $ | 5,870 | $ | 4,477 |
*) | The amounts for the years ended December 31, 2021 and 2020 include $5,494 and $4,197, respectively, of unrecognized tax benefits which are presented as a reduction from deferred tax assets, see Note 12d. |
The unrecognized tax benefits include accrued penalties and interest of $219 and $259 as of December 31, 2021 and 2020, respectively. During the years ended December 31, 2021 and 2020, the Company recorded income of $40 and $35 on the unrecognized tax benefits, respectively. | |
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate of the Company for the year ended December 31, 2021 is $44. |
December 31, | ||||||||
2018 | 2017 | |||||||
Balance at beginning of year | $ | 129 | $ | 776 | ||||
Settlements with tax authorities | - | (718 | ) | |||||
Reductions for prior years' tax position | - | (58 | ) | |||||
Additions for prior years' tax position | 1,809 | 129 | ||||||
Additions for current years' tax position | 296 | - | ||||||
Balance at the end of year *) | $ | 2,234 | $ | 129 |
i.The Company and its subsidiaries file income tax returns in Israel and in other jurisdictions of its subsidiaries. The Company's tax assessments through 20142019 are considered final. As of December 31, 2018,2021, the tax returns of the Company and its main subsidiaries are still subject to audits by the tax authorities for the tax years 20112016 through 2017.
F - 47
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 13:- SUPPLEMENTARY CONSOLIDATED BALANCE SHEETS INFORMATION
a.Other current assets:
December 31, | ||||||||
2021 | 2020 | |||||||
| ||||||||
Governmental authorities | $ | 3,727 | $ | 7,215 | ||||
Prepaid expenses | 5,857 | 5,654 | ||||||
Deferred charges | 1,600 | 1,162 | ||||||
Advance payments to suppliers | 1,279 | 1,643 | ||||||
Other | 2,144 | 963 | ||||||
| ||||||||
$ | 14,607 | $ | 16,637 |
b.Other current liabilities:
Payroll and related employee accruals | $ | 11,588 | $ | 10,512 | ||||
Governmental authorities | 988 | 639 | ||||||
Deferred rent income | 617 | 2,065 | ||||||
Other | 146 | 106 | ||||||
| ||||||||
$ | 13,339 | $ | 13,322 |
c.Long-term loan:
Interest rate for | December 31, | ||||||||||||||
Linkage | 2021 | 2020 | Maturity | 2021 | 2020 | ||||||||||
% | |||||||||||||||
| |||||||||||||||
Loan from bank: | |||||||||||||||
U.S. dollars | 0- | 4.77 | 2021 | $ | 0- | $ | 4,000 | ||||||||
| |||||||||||||||
Less - current maturities | 0- | 4,000 | |||||||||||||
| |||||||||||||||
$ | 0- | $ | 0- |
December 31, | ||||||||
2018 | 2017 | |||||||
Governmental authorities | $ | 6,264 | $ | 5,196 | ||||
Prepaid expenses | 6,612 | 4,220 | ||||||
Deferred charges | 9,446 | 7,100 | ||||||
Advance payments to suppliers | 2,651 | 1,136 | ||||||
Other | 1,049 | 1,763 | ||||||
$ | 26,022 | $ | 19,415 |
December 31, | ||||||||
2018 | 2017 | |||||||
Payroll and related employee accruals | $ | 13,229 | $ | 14,644 | ||||
Derivative instruments | 320 | - | ||||||
Governmental authorities | 506 | 2,206 | ||||||
Other | 533 | 3,194 | ||||||
$ | 14,588 | $ | 20,044 |
Interest rate for | December 31, | ||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Linkage | % | Maturity | |||||||||||||||||||
Loans from banks: | |||||||||||||||||||||
(a) | U.S. dollars | 4.77 | 4.77 | 2021 | $ | 12,000 | $ | 16,000 | |||||||||||||
(b) | Euro | EURIBOR +2.75 | EURIBOR +2.75 | 2020 | 556 | 1,061 | |||||||||||||||
12,556 | 17,061 | ||||||||||||||||||||
Less - current maturities | 4,458 | 4,479 | |||||||||||||||||||
$ | 8,098 | $ | 12,582 |
F - 48
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 11:13:- SUPPLEMENTARY CONSOLIDATED BALANCE SHEETSHEETS INFORMATION (Cont.)
The Company entered into a loan agreement with an Israeli bank secured by a floating charge on the assets of the Company, and which is further secured by a fixed pledge (mortgage) on the Company's real estate in Israel. In addition, there were financial covenants associated with the loan. On January 1, 2021 the loan was fully repaid by the Company. Other financial covenants the Company is required to satisfy are as follows:
Year ending December 31, | ||||
2020 | $ | 4,098 | ||
2021 | 4,000 | |||
$ | 8,098 |
Interest expenses on the long-term loans amounted to $614, $822$195 and $1,066$395 for the years ended December 31, 2018, 20172020 and 2016,2019, respectively.
d.Other long-term liabilities:
December 31, | ||||||||
2021 | 2020 | |||||||
| ||||||||
Long-term deferred rent | $ | 0- | $ | 521 | ||||
Other | 120 | 110 | ||||||
| ||||||||
$ | 120 | $ | 631 |
December 31, | ||||||||
2018 | 2017 | |||||||
Long-term tax accrual | $ | - | $ | 22 | ||||
Long-term deferred taxes | 580 | 986 | ||||||
$ | 580 | $ | 1,008 |
NOTE 14:- SELECTED CONSOLIDATED STATEMENTS OF INCOME (LOSS) DATA
a.Financial expenses, net:
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Income: | ||||||||||||
| ||||||||||||
Interest on cash equivalents, bank deposits and restricted cash | $ | 315 | $ | 399 | $ | 1,472 | ||||||
Other | 611 | 272 | 18 | |||||||||
| ||||||||||||
926 | 671 | 1,490 | ||||||||||
Expenses: | ||||||||||||
| ||||||||||||
Interest with respect to bank loans | 0- | 195 | 395 | |||||||||
Exchange rate differences, net | 543 | 176 | 103 | |||||||||
Bank charges including guarantees | 1,986 | 2,201 | 3,552 | |||||||||
Other | 119 | 6 | 57 | |||||||||
| ||||||||||||
2,648 | 2,578 | 4,107 | ||||||||||
| ||||||||||||
Total financial expenses, net | $ | 1,722 | $ | 1,907 | $ | 2,617 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Income: | ||||||||||||
Interest on cash equivalents, bank deposits and restricted cash | $ | 981 | $ | 447 | $ | 1,027 | ||||||
Other | 29 | 355 | 81 | |||||||||
1,010 | 802 | 1,108 | ||||||||||
Expenses: | ||||||||||||
Interest with respect to bank credit, loans and other | 614 | 844 | 1,098 | |||||||||
Exchange rate differences, net | 1,074 | 226 | 452 | |||||||||
Bank charges including guarantees | 3,560 | 3,857 | 4,323 | |||||||||
Other | 60 | 182 | 78 | |||||||||
5,308 | 5,109 | 5,951 | ||||||||||
Total financial expenses, net | $ | 4,298 | $ | 4,307 | $ | 4,843 |
F - 49
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 14:- SELECTED CONSOLIDATED STATEMENTS OF INCOME (LOSS) DATA (Cont.)
b.Earnings (loss) per share:
The following table sets forth the computation of basic and diluted net earnings (loss) per share:
1.Numerator:
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
As Restated (1) | ||||||||||||
Numerator for basic and diluted earnings (loss) per share - | ||||||||||||
| ||||||||||||
Net income (loss) available to holders of ordinary shares | $ | (3,033 | ) | $ | 35,076 | $ | 36,858 |
2.Denominator (in thousands):
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Denominator for basic earnings (loss) per share - | ||||||||||||
| ||||||||||||
Weighted average number of shares | 56,401 | 55,516 | 55,369 | |||||||||
Add - employee stock options | 0- | 67 | 662 | |||||||||
| ||||||||||||
Denominator for diluted earnings (loss) per share - adjusted weighted average shares assuming exercise of stock options | 56,401 | 55,583 | 56,031 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Numerator for basic and diluted earnings (loss) per share - | ||||||||||||
Net income (loss) available to holders of Ordinary shares: | $ | 18,409 | $ | 6,801 | $ | (5,340 | ) |
Denominator for basic net loss per share - | ||||||||||||
Weighted average number of shares | 54,927 | 54,681 | 51,970 | |||||||||
Add-employee stock options | 826 | 171 | *) | - | ||||||||
Denominator for diluted net earnings (loss) per share - adjusted weighted average shares assuming exercise of options | 55,753 | 54,852 | 51,970 |
(1) The Company restated previously issued consolidated financial statements. See Note 2 and Note 17 for additional information.
F - 50
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 15:- CUSTOMERS, GEOGRAPHIC AND SEGMENT INFORMATION
The Company applies ASC 280, "Segment Reporting" ("ASC 280"). Operating segments are defined as components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision maker. Segments are managed separately and can be described as follows:
Fixed Networks
provides advanced fixed broadband satellite communication networks, satellite communication systems and associated professional services and comprehensive turnkey solutions and fully managed satellite network services solutions. The Company’s customers are service providers, satellite operators, mobile network operators, or MNOs, telecommunication companies, orMobility Solutions
provides advanced on-the-move satellite communications equipment, systems and solutions, including airborne, maritime and ground-mobile satellite systems and solutions.This segment provides solutions for land, sea and air connectivity, while placing major focus on the high-growth market of IFC, with the Company’s product portfolio comprises of high-speed modems, high performance on-the-move antennas and high efficiency, high power SSPAs and BUCs. The Company’s customers are service providers, system integrators,unique leading technology as well as defense and homeland security organizations, as well as other commercial entities worldwide.
Terrestrial Infrastructure Projects
includes the Company's construction of fiber and wireless network in Peru.F - 51
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 15:- CUSTOMERS, GEOGRAPHIC AND SEGMENT INFORMATION (cont.)
a.Information on the reportable operating segments:
1.The measurement of the reportable operating segments is based on the same accounting principles applied in these consolidated financial statements which includes certain corporate overhead allocations.
2.Financial information relating to reportable operating segments:
Year ended December 31, 2021 | |||||||||||||||||||
Fixed Networks | Mobility Solutions | Terrestrial Infrastructure Projects | Unallocated | Total | |||||||||||||||
| |||||||||||||||||||
Revenues | $ | 114,398 | $ | 77,614 | $ | 22,958 | $ | 0- | $ | 214,970 | |||||||||
Cost of revenues | 72,885 | 45,665 | 25,153 | 0- | 143,703 | ||||||||||||||
| |||||||||||||||||||
Gross profit (loss) | 41,513 | 31,949 | (2,195 | ) | 0- | 71,267 | |||||||||||||
| |||||||||||||||||||
Research and development, net | 9,943 | 21,393 | 0- | 0- | 31,336 | ||||||||||||||
Selling and marketing | 15,305 | 6,169 | 38 | 0- | 21,512 | ||||||||||||||
General and administrative | 8,943 | 5,059 | 1,585 | 0- | 15,587 | ||||||||||||||
Impairment of held for sale asset | 0- | 0- | 0- | 651 | 651 | ||||||||||||||
| |||||||||||||||||||
Operating income (loss) | 7,322 | (672 | ) | (3,818 | ) | (651 | ) | 2,181 | |||||||||||
Financial expenses, net | 1,722 | ||||||||||||||||||
| |||||||||||||||||||
Income before taxes | 459 | ||||||||||||||||||
Taxes on income | 3,492 | ||||||||||||||||||
| |||||||||||||||||||
Net loss | $ | (3,033 | ) | ||||||||||||||||
| |||||||||||||||||||
Depreciation and amortization expenses | $ | 5,740 | $ | 5,138 | $ | 113 | $ | 0- | $ | 10,991 |
Year ended December 31, 2018 | ||||||||||||||||
Fixed Networks | Mobility Solutions | Terrestrial Infrastructure Projects | Total | |||||||||||||
Revenues | $ | 144,208 | $ | 97,180 | $ | 25,003 | $ | 266,391 | ||||||||
Cost of revenues | 93,745 | 47,995 | 30,614 | 172,354 | ||||||||||||
Gross profit | 50,463 | 49,185 | (5,611 | ) | 94,037 | |||||||||||
Research and development, net | 11,764 | 21,259 | - | 33,023 | ||||||||||||
Selling and marketing | 16,106 | 6,421 | 179 | 22,706 | ||||||||||||
General and administrative | 11,302 | 4,436 | 1,286 | 17,024 | ||||||||||||
Operating income (loss) | 11,291 | 17,069 | (7,076 | ) | 21,284 | |||||||||||
Financial expenses, net | 4,298 | |||||||||||||||
Income before taxes | 16,986 | |||||||||||||||
Taxes on income (benefit) | (1,423 | ) | ||||||||||||||
Net income | 18,409 | |||||||||||||||
Depreciation and amortization expenses | $ | 6,811 | $ | 6,128 | $ | 210 | $ | 13,149 |
Year ended December 31, 2017 | ||||||||||||||||
Fixed Networks | Mobility Solutions | Terrestrial Infrastructure Projects | Total | |||||||||||||
Revenues | $ | 116,105 | $ | 88,397 | $ | 78,254 | $ | 282,756 | ||||||||
Cost of revenues | 81,920 | 46,493 | 71,848 | 200,261 | ||||||||||||
Gross profit | 34,185 | 41,904 | 6,406 | 82,495 | ||||||||||||
Research and development, net | 12,172 | 15,842 | - | 28,014 | ||||||||||||
Selling and marketing | 17,782 | 5,782 | 195 | 23,759 | ||||||||||||
General and administrative | 10,987 | 6,326 | 2,548 | 19,861 | ||||||||||||
Operating income (loss) | (6,756 | ) | 13,954 | 3,663 | 10,861 | |||||||||||
Financial expenses, net | 4,307 | |||||||||||||||
Income before taxes | 6,554 | |||||||||||||||
Taxes on income (benefit) | (247 | ) | ||||||||||||||
Net income | 6,801 | |||||||||||||||
Depreciation and amortization expenses | $ | 5,046 | $ | 7,902 | $ | 192 | $ | 13,140 |
F - 52
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 15:- CUSTOMERS, GEOGRAPHIC AND SEGMENT INFORMATION (Cont.)
Year ended December 31, 2020 | ||||||||||||||||||||
Fixed Networks | Mobility Solutions | Terrestrial Infrastructure Projects | Unallocated | Total | ||||||||||||||||
As Restated (1) | As Restated (1) | As Restated (1) | ||||||||||||||||||
| ||||||||||||||||||||
Revenues | $ | 92,496 | $ | 54,169 | $ | 19,470 | $ | 0- | $ | 166,135 | ||||||||||
Cost of revenues | 61,939 | 37,728 | 25,088 | 0- | 124,755 | |||||||||||||||
| ||||||||||||||||||||
Gross profit (loss) | 30,557 | 16,441 | (5,618 | ) | 0- | 41,380 | ||||||||||||||
| ||||||||||||||||||||
Research and development, net | 7,350 | 18,953 | 0- | 0- | 26,303 | |||||||||||||||
Selling and marketing | 12,388 | 4,448 | 35 | 0- | 16,871 | |||||||||||||||
General and administrative | 8,520 | 4,002 | 1,541 | 0- | 14,063 | |||||||||||||||
Merger, acquisition and related litigation income, net | 0- | 0- | 0- | (53,633 | ) | (53,633 | ) | |||||||||||||
| ||||||||||||||||||||
Operating income (loss) | 2,299 | (10,962 | ) | (7,194 | ) | 53,633 | 37,776 | |||||||||||||
Financial expenses, net | 1,907 | |||||||||||||||||||
| ||||||||||||||||||||
Income before taxes | 35,869 | |||||||||||||||||||
Taxes on income | 793 | |||||||||||||||||||
| ||||||||||||||||||||
Net income | $ | 35,076 | ||||||||||||||||||
| ||||||||||||||||||||
Depreciation and amortization expenses | $ | 5,953 | $ | 4,259 | $ | 79 | $ | 0- | $ | 10,291 |
Year ended December 31, 2019 | ||||||||||||||||||||
Fixed Networks | Mobility Solutions | Terrestrial Infrastructure Projects | Unallocated | Total | ||||||||||||||||
As Restated (1) | As Restated (1) | As Restated (1) | ||||||||||||||||||
| ||||||||||||||||||||
Revenues | $ | 127,142 | $ | 104,665 | $ | 25,527 | $ | 0- | $ | 257,334 | ||||||||||
Cost of revenues | 80,038 | 53,263 | 27,836 | 0- | 161,137 | |||||||||||||||
| ||||||||||||||||||||
Gross profit (loss) | 47,104 | 51,402 | (2,309 | ) | 0- | 96,197 | ||||||||||||||
| ||||||||||||||||||||
Research and development, net | 10,919 | 19,265 | 0- | 0- | 30,184 | |||||||||||||||
Selling and marketing | 14,955 | 6,485 | 48 | 0- | 21,488 | |||||||||||||||
General and administrative | 11,279 | 5,914 | 1,322 | 0- | 18,515 | |||||||||||||||
Merger, acquisition and related litigation expenses, net | 0- | 0- | 0- | 118 | 118 | |||||||||||||||
| ||||||||||||||||||||
Operating income (loss) | 9,951 | 19,738 | (3,679 | ) | (118 | ) | 25,892 | |||||||||||||
Financial expenses, net | 2,617 | |||||||||||||||||||
| ||||||||||||||||||||
Income before taxes | 23,275 | |||||||||||||||||||
Tax benefit | (13,583 | ) | ||||||||||||||||||
| ||||||||||||||||||||
Net income | $ | 36,858 | ||||||||||||||||||
| ||||||||||||||||||||
Depreciation and amortization expenses | $ | 7,032 | $ | 3,871 | $ | 75 | $ | 0- | $ | 10,978 |
(1) The Company restated previously issued consolidated financial statements. See Note 2 and Note 17 for additional information.
F - 60
Year ended December 31, 2016 | ||||||||||||||||
Fixed Networks | Mobility Solutions | Terrestrial Infrastructure Projects | Total | |||||||||||||
Revenues | $ | 124,930 | $ | 62,911 | $ | 91,710 | $ | 279,551 | ||||||||
Cost of revenues | 84,986 | 40,962 | 78,113 | 204,061 | ||||||||||||
Gross profit | 39,944 | 21,949 | 13,597 | 75,490 | ||||||||||||
Research and development, net | 12,599 | 12,254 | - | 24,853 | ||||||||||||
Selling and marketing | 17,710 | 5,483 | 218 | 23,411 | ||||||||||||
General and administrative | 13,750 | 9,138 | 3,583 | 26,471 | ||||||||||||
Operating income (loss) | (4,115 | ) | (4,926 | ) | 9,796 | 755 | ||||||||||
Financial expenses, net | (4,843 | ) | ||||||||||||||
Loss before taxes | (4,088 | ) | ||||||||||||||
Taxes on income | 1,252 | |||||||||||||||
Loss | (5,340 | ) | ||||||||||||||
Depreciation and amortization expenses | $ | 5,394 | $ | 7,530 | $ | 184 | $ | 13,108 |
GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 15:- CUSTOMERS, GEOGRAPHIC AND SEGMENT INFORMATION (Cont.)
b.Geographic information:
Following is a summary of revenues by geographic areas. Revenues attributed to geographic areas, based on the location of the end customers and in accordance with ASC 280, are as follows:
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
As Restated (1) | ||||||||||||
| ||||||||||||
Latin America *) | $ | 70,421 | $ | 58,872 | $ | 75,464 | ||||||
Asia Pacific | 45,512 | 25,265 | 44,181 | |||||||||
United States and Canada | 71,468 | 59,819 | 107,520 | |||||||||
Europe, the Middle East and Africa **) | 27,569 | 22,179 | 30,169 | |||||||||
| ||||||||||||
$ | 214,970 | $ | 166,135 | $ | 257,334 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Latin America | $ | 94,707 | $ | 132,134 | $ | 143,491 | ||||||
Asia Pacific | 39,381 | 34,586 | 47,094 | |||||||||
North America | 97,122 | 73,921 | 54,728 | |||||||||
Europe, the Middle East and Africa | 35,181 | 42,115 | 34,238 | |||||||||
$ | 266,391 | $ | 282,756 | $ | 279,551 |
*)Revenues attributed to Peru in 2021 amounted to $ 49,511.
**)Revenues attributed to Israel in 2021 amounted to $ 5,923.
(1) The Company restated previously issued consolidated financial statements. See Note 2 and Equipment, net:Note 17 for additional information.
c.The Company's long-lived assets (property and equipment, net and operating lease right-of-use assets) are located as follows:
December 31, | ||||||||
2021 | 2020 | |||||||
| ||||||||
Israel | $ | 58,435 | $ | 59,554 | ||||
Latin America | 5,518 | 3,657 | ||||||
United States | 8,448 | 8,737 | ||||||
Europe | 3,179 | 8,593 | ||||||
Other | 1,289 | 1,510 | ||||||
| ||||||||
$ | 76,869 | $ | 82,051 |
d.The table below represents the revenues from major customers and their segments:
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
| As Restated (1) | |||||||||||
Customer A – Terrestrial and Fixed | 19 | % | 20 | % | 14 | % | ||||||
Customer D – Mobility | 12 | % | 0* | ) | 0* | ) | ||||||
Customer B – Mobility | 0* | ) | 11 | % | 13 | % | ||||||
Customer C – Mobility | 0* | ) | 0* | ) | 11 | % |
December 31, | ||||||||
2018 | 2017 | |||||||
Israel | $ | 64,018 | $ | 62,606 | ||||
Latin America | 4,564 | 5,000 | ||||||
United States | 5,620 | 3,733 | ||||||
Europe | 9,117 | 9,426 | ||||||
Other | 1,084 | 1,481 | ||||||
$ | 84,403 | $ | 82,246 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Customer A | 10 | % | 28 | % | 34 | % | ||||||
Customer B | 15 | % | * | ) | * | ) | ||||||
Customer C | 13 | % | * | ) | * | ) |
*)Less than 10%
Customer A is located in Peru, CustomerCustomers B, isC and D are located in North Americathe United States.
(1) The Company restated previously issued consolidated financial statements. See Note 2 and Customer C is located in Colombia.
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Cost of revenues of products | $ | 764 | $ | 3,770 | $ | 12,280 | ||||||
Research and development | $ | 346 | $ | 61 | $ | - | ||||||
Purchase of property and equipment and inventory | $ | 101 | $ | 100 | $ | - |
F - 54
GILAT SATELLITE NETWORKS LTD.LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
December 31, | ||||||||
2018 | 2017 | |||||||
Advance payments | $ | 144 | $ | - | ||||
Trade payables | $ | 125 | $ | 1,220 | ||||
Accrued expenses | $ | 1,797 | $ | 2,241 |
NOTE 15:- SUBSEQUENT EVENT
e.Commencing in the first quarter of 2022, in order to reflect the Company’s new management’s approach in the management of the Company’s operations, organizational alignment, customer base and end markets, the Company operates in three new operating segments, as follows:
•
Satellite Networks is focused on the development and supply of networks that are used as the platform that enables the latest satellite constellations of HTS, VHTS and NGSO opportunities worldwide. The Segment provides advanced broadband satellite communication networks and associated professional services and comprehensive turnkey solutions and managed satellite network services solutions. Segment’s customers are service providers, satellite operators, MNOs, Telcos, large enterprises, system integrators, defense, homeland security organizations and governments worldwide. Principal applications include In-Flight-Connectivity, cellular backhaul, maritime, social inclusion solutions, government, defense and enterprise networks and are driving meaningful partnerships with satellite operators to leverage Segment’s technology and breadth of services to deploy and operate the ground-based satellite communication networks. Segment’s product portfolio includes a leading satellite network platform with high-speed VSATs, high performance on-the-move antennas, BUCs and transceivers.
•
Integrated Solutions is focused on the development, manufacturing and supply of products and solutions for mission-critical defense and broadcast satellite communications systems, advanced on-the-move and on-the-pause satellite communications equipment, systems and solutions, including airborne, ground-mobile satellite systems and solutions. The Segment product portfolio comprises of leading high-efficiency, high-power SSPAs, BUCs and transceivers with a field-proven, high-performance variety of frequency bands. The segment’s customers are satellite operators, In-Flight Connectivity service providers, defense and homeland security system integrators, and NGSO gateway integrators.
•
Network Infrastructure and Services is focused on telecom operation and implementation of large-scale networks projects in Peru. The Segment provides terrestrial (fiber optic and wireless network) and satellite network construction and operation. The Segment serves customers through technology integration, managed networks and services, connectivity services, internet access and telephony over the Segment’s networks. The Segment implements projects using various technologies (including the Company’s equipment), mainly based on BOT and BOO contracts.
The Company is still evaluating whether the change in its operating segments, as described above, affects goodwill assignment to reporting units.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 16:- RELATED PARTY BALANCES AND TRANSACTIONS
a.The Company entered into a number of agreements for the purchase of infrastructure, construction and services from C. Mer Industries Ltd. ("C. Mer"), a publicly traded company in Israel (TASE). As of December 31, 2021, the Company's largest shareholder, FIMI Opportunity Funds ("FIMI"), holds approximately 36.6% of C. Mer's share capital and representatives of FIMI serve on C. Mer’s board of directors.
b.In December 2015 the Company entered into a memorandum of understanding with Orbit Communication Systems, ("Orbit"), a publicly traded company in Israel (TASE), for development and manufacture of an antenna for an aggregate amount of approximately $1,750. The memorandum specifies prices per additional product units ordered in the future by the Company. In August 2017, FIMI acquired approximately 33.4% of Orbit's share capital. As of December 31, 2021, FIMI holds approximately 31.39% of Orbit share capital and representatives of FIMI serve on Orbit's board of directors.
In addition, Euclid Ltd., a supplier of the Company, was fully acquired by Orbit in January 2022. The Company purchases from Euclid antennas and related services.
c.The transactions with Company’s related parties were approved by Company’s Audit Committee and Board of Directors declaredin accordance with the requirements of the Israeli Companies Law.
d.Transactions with the related parties:
Year ended December 31, |
| |||||||||||
2021 | 2020 | 2019 |
| |||||||||
As Restated (1) | ||||||||||||
|
| |||||||||||
Cost of revenues of products | $ | 1,044 | $ | 110 | $ | 1,318 |
| |||||
|
| |||||||||||
Purchase of property and equipment and inventory | $ | 0- | $ | 100 | $ | 0- |
|
e.Balances with the related parties:
December 31, |
| |||||||
2021 | 2020 |
| ||||||
| As Restated (1) |
| ||||||
Deferred charges (a part of Other current assets) | $ | 202 | $ | 176 |
| |||
|
| |||||||
Trade payables | $ | 466 | $ | 899 |
|
(1) The Company restated previously issued consolidated financial statements. See Note 2 and Note 17 for additional information.
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 17:- RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
The following tables present the impact of adjustments made in the Company’s revenues and cost of revenues in its consolidated financial statements as of and for the years ended December 31, 2019 and 2020. See Note 2 for additional information.
The consolidated statements of cash flows are not presented in the following tables because there is no impact on total cash flows from operating activities, investing activities and financing activities. The impact from the restatements within the operating activities section of the cash flow statement are illustrated in the consolidated balance sheets adjustments below.
Consolidated Balance Sheets:
ASSETS | December 31, 2020 |
| ||||||||||
As Reported | Adjustments | As Restated |
| |||||||||
|
| |||||||||||
Contract assets | $ | 41,573 | $ | 5,506 | $ | 47,079 |
| |||||
Total current assets | 233,406 | 5,506 | 238,912 |
| ||||||||
Long-term contract assets | 0- | 12,880 | 12,880 |
| ||||||||
Total long-term assets | 38,678 | 12,880 | 51,558 | |||||||||
Total assets | $ | 393,806 | $ | 18,386 | $ | 412,192 |
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, 2020 |
| |||||||||||
As Reported | Adjustments | As Restated |
| |||||||||
|
| |||||||||||
Accrued expenses | $ | 46,387 | $ | 3,495 | $ | 49,882 |
| |||||
Advances from customers and deferred revenues | 26,244 | (2,039 | ) | 24,205 |
| |||||||
Total current liabilities | 147,354 | 1,456 | 148,810 |
| ||||||||
Long-term advances from customers | 1,890 | 348 | 2,238 | |||||||||
Total long-term liabilities | 12,642 | 348 | 12,990 | |||||||||
Accumulated deficit | (691,446 | ) | 16,582 | (674,864 | ) | |||||||
Total shareholders' equity | 233,810 | 16,582 | 250,392 | |||||||||
Total liabilities and shareholders' equity | $ | 393,806 | $ | 18,386 | $ | 412,192 |
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 17:- RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
Consolidated Statements of Income:
Year ended December 31, 2020 |
| |||||||||||
As Reported | Adjustments | As Restated |
| |||||||||
Revenues: | ||||||||||||
Products | $ | 94,010 | $ | 425 | $ | 94,435 |
| |||||
Services | 71,875 | (175 | ) | 71,700 |
| |||||||
Total revenues | 165,885 | 250 | 166,135 | |||||||||
| ||||||||||||
Cost of revenues: | ||||||||||||
Products | 84,300 | 85 | 84,385 | |||||||||
Services | 40,370 | - | 40,370 | |||||||||
Total cost of revenues | 124,670 | 85 | 124,755 | |||||||||
| ||||||||||||
Gross profit | 41,215 | 165 | 41,380 | |||||||||
Operating income | 37,611 | 165 | 37,776 | |||||||||
Income before taxes on income | 35,704 | 165 | 35,869 | |||||||||
Net income | $ | 34,911 | $ | 165 | $ | 35,076 | ||||||
| ||||||||||||
*) Adjustment for total basic and diluted earnings per share is lower than $0.01 |
Year ended December 31, 2019 |
| |||||||||||
As Reported | Adjustments | As Restated |
| |||||||||
Revenues: | ||||||||||||
Products | $ | 185,721 | $ | (6,036 | ) | $ | 179,685 |
| ||||
Services | 77,771 | (122 | ) | 77,649 |
| |||||||
Total revenues | 263,492 | (6,158 | ) | 257,334 | ||||||||
| ||||||||||||
Cost of revenues: | ||||||||||||
Products | 122,071 | (6,478 | ) | 115,593 | ||||||||
Services | 45,544 | 0- | 45,544 | |||||||||
Total cost of revenues | 167,615 | (6,478 | ) | 161,137 | ||||||||
| ||||||||||||
Gross profit | 95,877 | 320 | 96,197 | |||||||||
Operating income | 25,572 | 320 | 25,892 | |||||||||
Income before taxes on income | 22,955 | 320 | 23,275 | |||||||||
Net income | $ | 36,538 | $ | 320 | $ | 36,858 | ||||||
Total earnings per share: | ||||||||||||
Basic | $ | 0.66 | $ | 0.01 | $ | 0.67 | ||||||
Diluted | $ | 0.65 | $ | 0.01 | $ | 0.66 |
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 17:- RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
Consolidated Statements of Comprehensive Income:
Year ended December 31, 2020 |
| |||||||||||
As Reported | Adjustments | As Restated |
| |||||||||
Net income | $ | 34,911 | $ | 165 | $ | 35,076 | ||||||
Comprehensive income | $ | 33,942 | $ | 165 | $ | 34,107 |
|
Year ended December 31, 2019 |
| |||||||||||
As Reported | Adjustments | As Restated |
| |||||||||
Net income | $ | 36,538 | $ | 320 | $ | 36,858 | ||||||
Comprehensive income | $ | 36,870 | $ | 320 | $ | 37,190 |
|
Restated segments information
Terrestrial Infrastructure Projects
Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||||||||||||||||
As Reported | Adjustments | As Restated | As Reported | Adjustments | As Restated | |||||||||||||||||||
Revenues | $ | 19,045 | $ | 425 | $ | 19,470 | $ | 31,562 | $ | (6,035 | ) | $ | 25,527 | |||||||||||
Cost of revenues | 25,003 | 85 | 25,088 | 34,314 | (6,478 | ) | 27,836 | |||||||||||||||||
Gross loss | (5,958 | ) | 340 | (5,618 | ) | (2,752 | ) | 443 | (2,309 | ) | ||||||||||||||
Operating loss | $ | (7,534 | ) | $ | 340 | $ | (7,194 | ) | $ | (4,122 | ) | $ | 443 | $ | (3,679 | ) |
Fixed Networks
Year ended December 31, 2020 | Year ended December 31, 2019 | |||||||||||||||||||||||
As Reported | Adjustments | As Restated | As Reported | Adjustments | As Restated | |||||||||||||||||||
Revenues | $ | 92,671 | $ | (175 | ) | $ | 92,496 | $ | 127,265 | $ | (123 | ) | $ | 127,142 | ||||||||||
Cost of revenues | 61,939 | 0- | 61,939 | 80,038 | 0- | 80,038 | ||||||||||||||||||
Gross profit | 30,732 | (175 | ) | 30,557 | 47,227 | (123 | ) | 47,104 | ||||||||||||||||
Operating profit | $ | 2,474 | $ | (175 | ) | $ | 2,299 | $ | 10,074 | $ | (123 | ) | $ | 9,951 |
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GILAT SATELLITE NETWORKS LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands
NOTE 18:- SUBSEQUENT EVENT
Against the backdrop of the recent military conflict of Russia and Ukraine and the rising tensions between the U.S. and other countries, on the date of this annual report a cash dividendone hand, and Russia, on the other hand, major economic sanctions and export controls restrictions on Russia and various Russian entities were imposed by the U.S., European Union and the United Kingdom in February 2022, and additional sanctions and restrictions may be imposed in the amountfuture. Theses sanctions and restrictions may materially restrict the Company’s business in Russia which mainly includes exports to Russia, which amounted to approximately $6,300 in 2021, and may delay or prevent the Company from collecting funds and perform money transfers from Russia. While the Company’s business in Russia is of $0.45 per share (or approximately $25,000), payable on April 11, 2019limited in scope and not material to shareholders'the Company’s consolidated results, these restrictions may cause a reduction of record on March 29, 2019. This will be the first timeCompany’s sales and financial results. In Addition, The Company receives manufacturing services from a global manufacturer’s facility in Ukraine. While the manufacturer assured the Company that the Company will payoperations of the plant have not been interrupted by the military situation in Ukraine and has a dividend, however the Company has not adopted a general policy regarding the distribution of dividends and makesrecovery plan in place, there is no statements as to the distribution of dividendsassurance that negative developments in the foreseeable future.
F - 5567