PETAH TIKVA, Israel -- ECI Telecom Ltd. (Nasdaq: ECIL - News) today announced consolidated results of operations for the fourth quarter and full year ended December 31, 2002. Fourth Quarter Results Revenues for the fourth quarter of 2002 were $149 million compared to $147 million in the third quarter of 2002 and $210 million in the fourth quarter of 2001. On a GAAP basis Gross profit for the fourth quarter of 2002 was $67.0 million or 44.9%, compared to $52.4 million, or 35.6% in the third quarter of 2002 and $58.7 million, or 27.9%, in the fourth quarter of last year. The operating loss for the fourth quarter of 2002 was $2.9 million compared to $42.0 million in the third quarter and $35.9 million in the fourth quarter of 2001. The net loss for the fourth quarter was $7.0 million or $0.06 per share compared to $89.1 million or $0.83 per share in the third quarter of 2002 and $43.1 million, or $0.46 per share, in the fourth quarter of last year. Applicable adjustments for pro forma results in the fourth quarter, 2002 In the fourth quarter of 2002 the Company took a $1.5 million provision for impairment of assets and incurred a $2.3 million loss from discontinued operations. In the fourth quarter of 2001, the Company wrote off $10.4 million of inventory and recorded an $8.4 million royalties settlement with the Government of Israel, a $0.9 million impairment of assets, $7.5 million in restructuring and spin-off expenses and a $5.7 million loss from discontinued operations. Pro forma presentation of fourth quarter, 2002 results, following application of adjustments: The pro forma operating loss for the fourth quarter of 2002 was $1.4 million compared to $0.5 million in the third quarter and $7.7 million in the fourth quarter of 2001. The pro forma net loss for the fourth quarter of 2002 was $3.2 million or $0.03 per share compared to $4.9 million, or $0.05 per share, in the third quarter and $9.4 million, or $0.10 per share for the fourth quarter of 2001. Cash Flow and Balance Sheet During the quarter, ECI continued to generate positive cash flow from operations. Net cash (cash, cash equivalents and short term investments minus bank debt), increased to $133 million, compared to $111 million at the end of the third quarter, in spite of investing $10 million of cash in Veraz Networks. ECI also paid back another $13 million of bank debt. During the quarter, inventories declined by $18 million and trade receivables also declined. For the full year of 2002, ECI had strong positive cash flow from operations. The company ended 2002 with $133 million of net cash compared to net debt of $87 million at the end of 2001, a net change of $220 million. It reduced inventories by $125 million and trade receivables by $94 million. The company also paid back a total of $90 million of bank debt. Results for full year, 2002 Revenues for 2002 were $646 million compared to $891 million in 2001. Revenues in 2001 included $45.5 million from ECI's Business Systems unit, which was sold during the fourth quarter of 2001. On a GAAP basis Gross profit for 2002 was $251 million, or 38.9% compared to $156 million or 17.5% for 2001. The operating loss was $53 million compared to an operating loss of $320 million for 2001. The net loss for 2002 was $156 million, or $1.48 per share, compared to a net loss of $412 million, or $4.44 per share, for 2001. Applicable adjustments for pro forma results for the full year During 2002, the Company wrote off $7.4 million of inventory, took a $34 million provision for a specific doubtful account, recorded an $18 million provision for an investment, and $1.5 million impairment of assets. It included, in other expenses, $2.2 million associated with the spin-off of NGTS, offset by income of $11.5 million associated with the sale of a portion of the Company's holdings in ECtel. The Company reversed $2.6 million in taxes and recorded a loss from discontinuing operations of $77 million, including impairment of assets associated with InnoWave. In 2001, the Company had written off $99 million of inventory, recorded impairment of assets, restructuring, and spin-off expenses totaling $116 million, and other expenses of $30 million associated primarily with capital losses and impairment of investments. The Company also took an exceptional provision for doubtful accounts of $5.9 million and recorded a royalty settlement with the Government of Israel of $8.4 million. Pro forma presentation of the annual results, following application of adjustments: The pro forma gross profit for 2002 was $258 million, or 40.0%, compared to pro forma gross profit of $255 million, or 28.6%, for 2001. The pro forma operating loss for 2002 was $9.7 million compared to a pro forma operating loss of $89.6 million in 2001. The pro forma net loss for 2002 was $23.5 million or $0.22 per share compared to $89.7 million or $0.97 per share for 2001. Commenting on the results, Doron Inbar, President and CEO said, "During 2002, ECI accomplished its strategic and operating goals of focusing on its core businesses, exiting non-core activities, streamlining the Company and strengthening its financial position. "Last month we announced that the merger of NGTS and NexVerse, to form Veraz Networks, had closed. By combining NGTS' industry leading media gateway with NexVerse's outstanding softswitches, ECI maintains a significant foothold in the emerging VoIP market, a market with considerable growth potential. Similarly, last quarter we announced our intention to sell InnoWave and reflected the impending sale in our third quarter 2002 results. We expect to sign a definitive agreement for the sale, shortly." Guidance ECI believes the market will remain challenging in 2003 with further declines in carrier capital spending likely. The Company expects revenues in its core businesses (the two divisions), to decline approximately 10% in the first quarter of 2003 compared to the fourth quarter of 2002. In addition, beginning in the first quarter of 2003, ECI's NGTS subsidiary has been spun off to Veraz Networks and ECI will begin supplying DCME to Veraz Networks for resale. The Company expects the decline in revenues to be substantially offset by a decline in expenses. ECI expects to continue to generate positive EBITDA and positive cash flow throughout 2003. ECI Telecom Ltd.