Koor Reports Increase in 2nd Quarter Net Income as Restructuring-Related Divestitures Yield Capital Gains
TEL AVIV, Israel--(BUSINESS WIRE)--August 27, 1998--Koor Industries Ltd. (NYSE:KOR) reported an increase in net income during the second quarter, derived primarily from capital gains. These gains resulted from Koor's ongoing divestiture program and restructuring activities, as mandated by the Company's strategic plan to focus on its core businesses. Revenues and operating income declined during the quarter.
For the second quarter ended June 30, 1998, net income was $34.2 million, up nearly 11% from $30.8 million one year ago. Per diluted ordinary share, Koor earned $2.10 for this year's June quarter, or $0.42 per American Depositary Share (ADS). In 1997, earnings per diluted share were $2.05, or $0.41 per ADS. One Koor ADS equals one-fifth of an ordinary share.
Revenues for the second quarter were $838.2 million, down 10% from $931.7 million last year, primarily reflecting prevailing Israeli recessionary conditions, lower sales by Koor's Telrad and Tadiran Telecommunications subsidiaries to Bezeq, the national Telephone Company, and the loss of sales from divested businesses.
These declines were partially offset by sustained growth in exports and international sales of telecommunications, electronics and agrochemical products. For the second quarter, exports totaled $379 million, up 3.6% from last year's $366 million. Through the first six months of 1998, exports and international sales grew 3.2%, from $749 million in 1997 to $773 million this year.
Koor's operating income was $46.0 million for the second quarter, and $99.8 million through 1998's first half, compared with $86.1 million in 1997's second quarter and $165.1 million during the first six months one year ago.
For the first half of 1998, revenues were $1.67 billion, compared with $1.83 billion in 1997. Six-month net income was $45.4 million this year, or $2.83 per diluted ordinary share ($0.57 per ADS) compared with $90.3 million, or $5.98 per share last year ($1.20 per ADS).
Jonathan Kolber, Koor's vice chairman who became chief executive officer on July 1, commented on the company's second-quarter results as follows: "The implementation of the multi-year strategic plan that we reviewed and adopted last March is moving forward. We are initiating changes that we believe will foster vigorous global growth in our core telecommunications, defense electronics and agrochemicals businesses. We also reduced Koor's exposure to many of the uncertainties affecting some segments of the Israeli economy. Moreover, as Koor continues its restructuring plans and divests peripheral businesses, consolidated operating results will serve as a progressively less significant indication of the Company's overall performance. However, management believes these steps will provide improved shareholder value as a result of the increase in the value of Koor's holdings."
Mr. Kolber also noted that shareholders' equity totaled $1.066 billion at June 30, 1998, as compared to $1.148 billion at year-end 1997. The decrease derives mainly from the accounting treatment relating to purchase of ECI shares from the Claridge Group. As Claridge is a controlling party in Koor, the Company was able to inherit Claridge's lower cost base in the ECI shares, resulting in an adjustment to equity. Also, in the first half, Koor charged $39 million in one-time provisions, primarily in the second quarter, mostly to cover the estimated realization of assets, including assets still to be divested.
During the first half of 1998, Koor's divestitures resulted in an after-tax capital gain of $54.5 million, equal to net income of $3.46 per diluted share, or $0.69 per ADS. Among the operations or interests in businesses divested during the second quarter were Gvanim Cable Television, D.I.Y. Home Centers, Shalon gas masks, Hod Lavan meat processing, Hornet trading and Tambour paints. Other divestitures completed or in process since then include Granite, which owns the Sonol petroleum retailing business; and Soltam, a weapon systems, munitions and metalworking company.
"As we implement our strategic plan," Mr. Kolber stated, "we are actively redeploying assets to our core businesses, such as through the major investment we made during the second quarter to purchase a significant stake in ECI Telecom. It is one of the world's leading integrated telecommunications network systems companies, complements our existing interests and increases our presence internationally." ECI Telecom (Nasdaq: ECILF) is based in Petah Tikva, Israel. It designs, develops, manufactures and markets digital telecommunications and data transmission systems, enabling network operators to deliver cost-effective services.
"Our agrochemical business, which operates on a global basis, continues to make progress despite a lower growth rate during the past quarter," Mr. Kolber continued. "However, we believe that the technological expertise and market strength of Makhteshim and Agan, which were combined in May, have us well positioned to capitalize on significant medium-term and long-range demand for insecticides, fungicides and herbicides."
Concluding his commentary, Mr. Kolber said: "As we continue to implement Koor's strategic plan, we are encouraged by our healthy balance sheet and the underlying strengths of our core subsidiaries, which have the international expertise, strategic partnerships and advanced technologies to make significant contributions to the future value of Koor. |
