Internet Gold Reports Financial Results For The Third Quarter of 2012

November 8, 2012

 

Internet Gold Reports Financial Results For The Third Quarter of 2012

 

– Progress In Line With B Communications’ Strategic Plan Driven By Bezeq’s Continued Strong Cash Generation –

 

Ramat Gan, Israel – November 8, 2012 – Internet Gold Ltd. (NASDAQ Global Market and TASE: IGLD) today reported its financial results for the third quarter ended September 30, 2012.

 

Bezeq’s results: For the third quarter of 2012, the Bezeq Group reported revenues of NIS 2.5 billion ($ 638 million) and operating profit of NIS 667 million ($ 171 million). Bezeq’s EBITDA for the third quarter totaled NIS 1 billion ($ 262 million), representing an EBITDA margin of 41%. Net income for the period attributed to the shareholders of Bezeq totaled NIS 342 million ($ 87 million). Bezeq’s cash flow from operating activities totaled NIS 1 billion ($ 262 million) during the third quarter of 2012.

 

Dividend from Bezeq: On October 10, 2012, Internet Gold’s subsidiary, B Communications received two dividend payments from Bezeq which together totaled NIS 464 million ($ 119 million). These dividend payments included a current dividend of NIS 309 million ($ 79 million), representing B Communications’ share of Bezeq’s net profit for the first half of 2012, and a special dividend of NIS 155 million ($ 40 million), representing B Communications’ share of the fourth installment of six special dividend payments declared by Bezeq and approved by its shareholders last year.

 

Cash Position: As of September 30, 2012, Internet Gold’s unconsolidated cash and cash equivalents totaled NIS 312 million ($ 80 million), its unconsolidated gross debt was NIS 1.17 billion ($ 299 million), and its unconsolidated net debt totaled NIS 858 million ($ 219 million).  

 

Internet Gold’s Unconsolidated Balance Sheet Data*

 

 

September 30,

December 31,

September 30,

December 31,

 

2012 

2011 

2012 

2011 

 

(NIS millions)

(US$ millions)

Short term liabilities

147

135

38

34

Long term liabilities

1,023

985

261

252

Total liabilities

1,170

1,120

299

286

Cash and cash equivalents

312

343

80

87

Total net debt

858

777

219

199

 

 

 

 

 

 

* Does not include the balance sheet of B Communications.

 

 

 

Internet Gold’s Third Quarter Consolidated Financial Results

 

Internet Gold’s revenues for the third quarter of 2012 were NIS 2,494 million ($ 638 million), a 15% decrease compared with NIS 2,917 million ($ 746 million) reported in the third quarter of 2011. For both the current and the prior-year periods, Internet Gold’s revenues consisted entirely of its share of Bezeq’s revenues.

 

Internet Gold’s net loss attributable to shareholders for the third quarter totaled NIS 62 million ($ 16 million), compared to a net loss attributable to shareholders of NIS 52 million ($ 13 million) reported in the third quarter of 2011. This net loss reflects the impact of two significant expenses:

 

  • Amortization of tangible and identifiable intangible assets resulting from the Bezeq acquisition: According to the rules of business combination accounting, the total purchase price of the Bezeq acquisition was allocated to Bezeq’s tangible and identifiable intangible assets based on their estimated fair values as determined by an analysis performed by an independent valuation firm. The company’s subsidiary, B Communications is amortizing certain of the acquired identifiable intangible assets in accordance with the economic benefit expected from such assets using an accelerated method of amortization. 

 

During the third quarter of 2012, Internet Gold’s subsidiary, B Communications recorded amortization expenses related to the Bezeq purchase price allocation (“Bezeq PPA”) of NIS 307 million ($ 78 million), net. From the Bezeq acquisition date (April 14, 2010) until the end of the reporting quarter, B Communications has amortized approximately 53% of the total Bezeq PPA. It expects to amortize an additional 5% in the fourth quarter of 2012.

 

B Communications’ Bezeq PPA amortization expense is a non-cash expense that is subject to adjustment. If, for any reason, the Company finds it necessary or appropriate to make adjustments to amounts already expensed, it may result in significant changes to future financial statements.

 

  • Financial expenses: Internet Gold’s unconsolidated financial expenses for the third quarter totaled NIS 17 million ($ 4 million). These expenses consisted primarily of expenses related to the Company’s debentures, which totaled NIS 25 million ($ 6 million) that were offset by financial income of NIS 8 million ($ 2 million) generated by our short term investments. The significant financial expenses recorded in the third quarter were due primarily to high CPI linkage expenses attributable to the 0.85% increase in the Israeli CPI, to which the Company’s debt is linked.

 

Internet Gold’s Unconsolidated Financial Results

 

 

Quarter ended September 30,

Quarter ended September 30,

 

2012

2011

2012

2011

 

(NIS millions)

(US$ millions)

Revenues

 –

 –

Financial expenses

(17)

(24)

(4)

(6)

Other expenses

(1)

(2)

 –

 –

Interest in Bcom’s net loss

(44)

(26)

(12)

(7)

Net loss

(62)

(52)

(16)

(13)


 

Comments of Management

 

Commenting on the results, Doron Turgeman, CEO of Internet Gold said, “The third quarter of 2012 was another stable period for Bezeq, demonstrating the cash flow-generating power of its formidable position in Israel’s telecommunications market. Despite current conditions in the Israeli capital market, as a long-term communications player with loans not burdened by share price-related covenants, our subsidiary B Communications is able to manage its cash position entirely according to plan, relying upon steady and visible cash flow to fulfill all loan commitments while continuing to accelerate its repayments.”

                                                                                                         

Bezeq Group Results (Consolidated)

 

To provide further insight into its results, the Company has provided the following summary of the Bezeq Group’s consolidated financial report for the quarter ended September 30, 2012. For a full discussion of the Bezeq Group’s results for the quarter, please refer to http://ir.bezeq.co.il.

 

 

 

Revenues of the Bezeq Group in the third quarter of 2012 amounted to NIS 2.49 billion compared with NIS 2.92 billion in the corresponding quarter of 2011, a decrease of 14.5%. Most of the decrease in the Bezeq Group’s revenues was due to lower revenues from the sale of cellular handsets and the erosion of revenues from cellular services.

 

Operating profit of the Bezeq Group in the third quarter of 2012 amounted to NIS 667 million, compared with NIS 944 million in the corresponding quarter of 2011, a decrease of 29.3%. Earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter of 2012 amounted to NIS 1.03 billion (EBITDA margin of 41.1%), compared with NIS 1.30 billion (EBITDA margin of 44.6%) in the corresponding quarter of 2011, a decrease of 21.1%. Net profit attributable to Bezeq shareholders in the third quarter of 2012 amounted to NIS 342 million compared with NIS 550 million in the corresponding quarter of 2011, a decrease of 37.8%. The decrease in profitability metrics was primarily due to a decrease in profitability in the cellular segment as well as lower capital gains from real estate and copper sales in the Fixed-line segment compared to the corresponding quarter of 2011.

 

 


 

Cash flow from operating activities in the third quarter of 2012 amounted to NIS 1.02 billion compared with NIS 882 million in the corresponding quarter of 2011, an increase of 16.1% mainly due to improved working capital in the cellular segment.  Free cash flow in the third quarter of 2012 amounted to NIS 754 million compared with NIS 508 million in the corresponding quarter of 2011, an increase of 48.4%. The increase in free cash flow was due to an increase in cash flow from operating activities as well as the completion of large infrastructure projects initiated in prior years.

 

Gross capital expenditures (CAPEX), in the third quarter of 2012 amounted to NIS 346 million compared with NIS 437 million in the corresponding quarter of 2011, a decrease of 20.8%. The Bezeq Group’s CAPEX to consolidated sales ratio in the third quarter of 2012 was 13.9%, compared with 15.0% in the corresponding quarter of 2011.

 

As of September 30, 2012, gross financial debt of the Bezeq Group was NIS 8.94 billion, compared with NIS 9.61 billion as of September 30, 2011. The net financial debt of the Bezeq Group was NIS 7.19 billion compared with NIS 5.99 billion as of September 30, 2011. At the end of September 2012, the Bezeq Group’s net financial debt to EBITDA ratio was 1.64, compared with 1.24 at the end of September 2011.

 

Notes:

 

  1. A.     Convenience Translation to Dollars: For the convenience of the reader, certain of the reported NIS figures of September 30, 2012 have been presented in millions of U.S. dollars, translated at the representative rate of exchange as of September 30, 2012 (NIS 3.912 = U.S. Dollar 1.00). The U.S. dollar ($) amounts presented should not be construed as representing amounts receivable or payable in U.S. dollars or convertible into U.S. dollars, unless otherwise indicated.

 

B.     Use of non-IFRS Measurements: We and the Bezeq Group’s management regularly use supplemental non-IFRS financial measures internally to understand, manage and evaluate its business and make operating decisions. We believe these non-IFRS financial measures provide consistent and comparable measures to help investors understand the Bezeq Group’s current and future operating cash flow performance.

 

These non-IFRS financial measures may differ materially from the non-IFRS financial measures used by other companies.

 

EBITDA is a non-IFRS financial measure generally defined as earnings before interest, taxes, depreciation and amortization. The Bezeq Group defines EBITDA as net income before financial income (expenses), net, impairment and other charges, expenses recorded for stock compensation in accordance with IFRS 2, income tax expenses and depreciation and amortization. We present the Bezeq Group’s EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structure, tax positions (such as the impact of changes in effective tax rates or net operating losses) and the age of, and depreciation expenses associated with, fixed assets (affecting relative depreciation expense).

 

 

 

EBITDA should not be considered in isolation or as a substitute for net income or other statement of operations or cash flow data prepared in accordance with IFRS as a measure of profitability or liquidity. EBITDA does not take into account our debt service requirements and other commitments, including capital expenditures, and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. In addition, EBITDA, as presented in this press release, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.

 

Reconciliation between the Bezeq Group’s results on an IFRS and non-IFRS basis is provided in a table immediately following the Bezeq Group’s consolidated results. Non-IFRS financial measures consist of IFRS financial measures adjusted to exclude amortization of acquired intangible assets, as well as certain business combination accounting entries. The purpose of such adjustments is to give an indication of the Bezeq Group’s performance exclusive of non-cash charges and other items that are considered by management to be outside of its core operating results. The Bezeq Group’s non-IFRS financial measures are not meant to be considered in isolation or as a substitute for comparable IFRS measures, and should be read only in conjunction with its consolidated financial statements prepared in accordance with IFRS.

 

About Internet Gold

Internet Gold is a telecommunications-oriented holding company which is a controlled subsidiary of Eurocom Communications Ltd. Internet Gold’s primary holding is its controlling interest in B Communications Ltd. (TASE and Nasdaq: BCOM), which in turn holds the controlling interest in Bezeq, The Israel Telecommunication Corp., Israel’s largest telecommunications provider (TASE: BZEQ). Internet Gold’s shares are traded on NASDAQ and the TASE under the symbol IGLD. For more information, please visit the following Internet sites:

 

www.igld.com

www.bcommunications.co.il

www.ir.bezeq.co.il

 

Forward-Looking Statements

This press release contains forward-looking statements that are subject to risks and uncertainties.  Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, general business conditions in the industry, changes in the regulatory and legal compliance environments, the failure to manage growth and other risks detailed from time to time in B Communications’ filings with the Securities Exchange Commission.  These documents contain and identify other important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.  Stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.  We undertake no obligation to update publicly or revise any forward-looking statement.

 

For further information, please contact:

 

Idit Cohen – IR Manager

idit@igld.com / Tel: +972-3-924-0000

 

Investor relations contacts:

Mor Dagan – Investor Relations

mor@km-ir.co.il / Tel: +972-3-516-7620

 

 

Internet Gold – Golden Lines Ltd.

 

Consolidated Statements of Financial Position

 

(In millions)

 

 

 

Convenience

 

 

 

 

translation into

 

 

 

 

U.S. dollars

 

 

 

September 30

September 30

September 30

December 31

 

2012

2012

2011

2011

 

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

 

NIS

US$

NIS

NIS

 

Assets

 

 

 

 

Cash and cash equivalents

 705

 180

 1,722 

1,447

Investments including derivatives

 1,743

 446

 2,721 

1,548

Trade receivables

 3,044

 778

 3,007 

3,059

Other receivables

 259

 66

 236 

294

Inventory

 149

 38

 199 

204

Assets classified as held-for-sale

 172

 44

113 

167

 

 

 

 

 

Total current assets

6,072

1,552

 7,998 

6,719

 

 

 

 

 

Investments including derivatives

 94

 24

115 

119

Long-term trade receivables

 1,193

 305

 1,594 

1,499

Property, plant and equipment

 6,811

 1,741

 7,392 

7,143

Intangible assets

 7,189

 1,838

 8,342 

8,085

Deferred and other expenses

 406

 104

 385 

412

Investments in equity-accounted investee

 

 

 

 

 (mainly loans)

 984

 251

 1,031 

1,059

Deferred tax assets

 144

 37

 218 

223

 

 

 

 

 

Total non-current assets

16,821

4,300

 19,077 

18,540

 

 

 

 

 

Total assets

22,893

5,852

 27,075 

25,259

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Internet Gold – Golden Lines Ltd.

 

Consolidated Statements of Financial Position

 

(In millions)

 

 

 

Convenience

 

 

 

 

translation into

 

 

 

 

U.S. dollars

 

 

 

September 30

September 30

September 30

December 31

 

2012

2012

2011

2011

 

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

 

NIS

US$

NIS

NIS

 

Liabilities

 

 

 

 

Short-term bank credit, current maturities of

 

 

 

 

 long-term liabilities and debentures

 1,057

 270

 1,567 

1,306

Trade payables

 770

 197

 919 

892

Other payables  including derivatives

 765

 195

 1,108 

790

Dividend payable

 1,366

 349

1,542 

669

Current tax liabilities

 564

 144

432 

499

Deferred income

 60

 15

 52 

56

Provisions

 172

 44

 220 

186

Employee benefits

 288

 74

 467 

389

 

 

 

 

 

Total current liabilities

5,042

1,288

 6,307 

4,787

 

 

 

 

 

Debentures

 6,066

 1,551

6,445 

6,388

Bank loans

 6,524

 1,668

 6,876 

6,753

Loans from institutions and others

 546

 140

548 

544

Dividend payable

 326

 83

 771 

636

Employee benefits

 228

 58

 271 

229

Other liabilities

 86

 22

 156 

186

Provisions

 71

 18

 70 

69

Deferred tax liabilities

 1,107

 283

 1,249 

1,426

 

 

 

 

 

Total non-current liabilities

14,954

3,823

 16,386 

16,231

 

 

 

 

 

Total liabilities

19,996

5,111

 22,693 

21,018

 

 

 

 

 

Equity

 

 

 

 

Total equity attributable to equity holders

 

 

 

 

 of the Company

(185)

(47)

(14) 

(27)

Non-controlling interest

3,082

788

 4,396 

4,268

 

 

 

 

 

Total equity

2,897

741

4,382 

4,241

 

 

 

 

 

Total liabilities and equity

22,893

5,852

 27,075 

25,259

 

 

 

 

 

 

 

 

 

 

Internet Gold – Golden Lines Ltd.

 

Consolidated Statements of Operations

 

(In millions, except per share data)

 

 

Nine months period ended

Three months period ended

Year ended

 

September 30,

September 30,

December 31,

 

 

Convenience

 

 

Convenience

 

 

 

 

translation

 

 

translation

 

 

 

 

into

 

 

into

 

 

 

 

U.S. dollars

 

 

U.S. dollars

 

 

 

2012

2012

2011

2012

2012

2011

2011

 

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

 

NIS

US$

NIS

NIS

US$

NIS

NIS

 

Revenues

7,829

2,001

8,726

2,494

638

2,917

11,376

 

 

 

 

 

 

 

 

Cost and expenses

 

 

 

 

 

 

 

Depreciation and amortization

2,267

579

2,113

757

194

714

2,984

Salaries

1,530

391

1,626

512

131

551

2,122

General and operating                   

 

 

 

 

 

 

 

 expenses

3,016

771

3,452

964

246

1,184

4,468

Other operating expenses, net

52

13

277

19

5

1

323

 

 

 

 

 

 

 

 

 

6,865

1,754

7,468

2,252

576

2,450

9,897

 

 

 

 

 

 

 

 

Operating income

964

247

1,258

242

62

467

1,479

 

 

 

 

 

 

 

 

Financing expenses, net

344

88

473

124

32

186

580

 

 

 

 

 

 

 

 

Income after financing

 

 

 

 

 

 

 

 expense, net

620

159

785

118

30

281

899

 

 

 

 

 

 

 

 

Share in losses of

 

 

 

 

 

 

 

equity-accounted investee

233

60

203

92

24

66

216

 

 

 

 

 

 

 

 

Income before income tax

387

99

582

26

6

215

683

 

 

 

 

 

 

 

 

Income tax

279

71

340

75

19

136

653

 

 

 

 

 

 

 

 

Net income (loss)

108

28

242

(49)

(13)

79

30

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

  Owners of the Company

(144)

(37)

(149)

(62)

(16)

(52)

(266)

  Non-controlling interest

252

65

391

13

3

131

296

Net income (loss)

108

28

242

(49)

(13)

79

30

 

 

 

 

 

 

 

 

Net loss per share, basic

(7.52)

(1.92)

(7.94)

(3.24)

(0.83)

(2.82)

(13.56)

 

 

 

 

 

 

 

 

Net loss per share, diluted

(7.55)

(1.93)

(8.00)

(3.24)

(0.83)

(2.84)

(13.60)