Internet Gold Reports Financial Results for The Third Quarter of 2013

November 7, 2013

Internet Gold Reports Financial Results for

The Third Quarter of 2013

 

  Maintaining sufficient liquidity for the coming years

 

 

Ramat Gan, Israel – Novmber 7, 2013 – Internet Gold – Golden Lines Ltd. (NASDAQ Global Market and TASE: IGLD) today reported its financial results for the third quarter ended September 30, 2013.

 

Bezeq’s Results: For the third quarter of 2013, the Bezeq Group reported revenues of NIS 2.4 billion ($ 679 million) and operating profit of NIS 721 million ($ 204 million). Bezeq’s EBITDA for the third quarter totaled NIS 1.05 billion ($ 297 million), representing an EBITDA margin of 44%. Net income for the period attributable to Bezeq’s shareholders totaled NIS 449 million ($ 127 million). Bezeq’s cash flow from operating activities during the period totaled NIS 1.1 billion ($ 323 million).  

Cash Position: As of September 30, 2013, Internet Gold’s unconsolidated cash and cash equivalents totaled NIS 279 million ($ 79 million), its unconsolidated gross debt was NIS 1.1 billion ($ 301 million) and its unconsolidated net debt was NIS 786 million ($ 222 million).  

 

Internet Gold’s Unconsolidated Balance Sheet Data*

 

In millions   Convenience    
    translation into    
    U.S. dollars    
    (Note A)    
  September 30, September 30, September 30, December 31,
  2013 2013 2012 2012
  NIS US$ NIS NIS
Short term liabilities 144 41 147 138
Long term liabilities 921 260 1,023 895
Total liabilities 1,065 301 1,170 1,033
Cash and cash equivalents 279 79 312 179
Total net debt 786 222 858 854
         

 

* Does not include the balance sheet of B Communications.

Dividend from Bezeq: On September 15, 2013, Internet Gold’s subsidiary, B Communications Ltd., received two dividend payments from Bezeq which together totaled NIS 455 million ($ 129 million). These dividend payments included a current dividend of NIS 300 million ($ 85 million), representing B Communications’ share of Bezeq’s net profit for the first half of 2013, and a special dividend of NIS 155 million ($ 44 million), representing B Communications’ share of the sixth and last installment of the special dividend declared by Bezeq and approved by its shareholders in 2011.

 

Internet Gold’s Third Quarter Financial Results

 

Internet Gold’s consolidated revenues for the third quarter of 2013 were NIS 2.4 billion ($ 679 million), a 3.8% decrease compared with NIS 2.5 billion reported in the third quarter of 2012. For both the current and the prior-year periods, Internet Gold’s consolidated revenues consisted entirely of Bezeq’s revenues.

During the third quarter of 2013, B Communications recorded net amortization expenses related to its Bezeq purchase price allocation (“Bezeq PPA”) of NIS 198 million ($ 56 million) in its consolidated financial statements. From April 14, 2010, the date of the acquisition of its interest in Bezeq, until June 30, 2013, B Communications has amortized approximately 57% of the total Bezeq PPA. The Bezeq PPA amortization expense is a non-cash expense that is subject to adjustment. If, for any reason, B Communications finds it necessary or appropriate to make adjustments to amounts already expensed, it may result in significant changes to its audited financial reports, as well as to future financial statements.

Internet Gold’s financial expenses, net: Internet Gold’s unconsolidated net financial expenses for the third quarter of 2013 totaled NIS 41 million ($ 12 million) compared with NIS 17 million in the third quarter of 2012. These expenses included NIS 29 million ($ 8 million) in payments to holders of the Company’s publicly-traded debentures, and a NIS 16 million ($ 3 million) non-cash expense related to the revaluation of Nurisha Holdings Ltd.’s option to purchase B Communications shares, which, in accordance with IAS 39, must be revalued each quarter until it vests in the second quarter of 2014. As non-cash items, any expense or income resulting from this revaluation do not affect the Company’s cash-flow. In addition, financial expenses were impacted by the third quarter’s 0.45% increase in inflation rates as compared to the third quarter of 2012, which increased payments due to the Company’s bond holders.

These expenses were partially offset by financial income of NIS 4 million that resulted from the Company’s marketable securities.

Internet Gold’s net loss attributable to shareholders for the third quarter of 2013 was NIS 32 million ($ 9 million), a 48% improvement compared to a net loss of NIS 62 million in the third quarter of 2012. 

 

Internet Gold’s Unconsolidated Financial Results 

 

In millions   Convenience    
    translation into    
    U.S. dollars    
    (Note A)    
  Three-month Three-month Three-month  
  period ended period ended period ended Year ended
  September 30, September 30, September 30, December 31,
  2013 2013 2012 2012
  NIS US$ NIS NIS
Revenues
Financial expenses (41) (12) (17) (60)
Other expenses (1) (1) (14)
Interest in BCOM’s net income (loss) 10  (44)  37
Net income (loss) 32 9 (62) (37)

 

Comments of Management

Commenting on the results, Doron Turgeman, CEO of Internet Gold said, “The third quarter was another period of progress according to our long-term work plan. With the goal of increasing our liquidity, during the quarter we sold a portion of our B Communications shares and now have a cash balance that is sufficient, according to the assumptions of our current work plan, to fully service our debt until 2015. In addition, the dividend distribution that B Communications has recently announced will further increase our liquidity. In general, we continue to be very pleased with all aspects of the Bezeq acquisition, which continues to generates a steady return that enhances our overall financial position and capabilities. We remain exceedingly confident regarding Bezeq’s positioning in Israel’s communications market and continue to seek out appropriate high-potential opportunities further afield.”   

 

Bezeq Group Results (Consolidated)

To provide further insight into its results, the Company is providing the following summary of the consolidated financial report of the Bezeq Group for the third quarter ended September 30, 2013. For a full discussion of Bezeq’s results for the third quarter of 2013, please refer to its website: http://ir.bezeq.co.il.

 

 

 

Revenues of the Bezeq Group in the third quarter of 2013 amounted to NIS 2.40 billion ($ 679 million) compared with NIS 2.49 billion in the corresponding quarter of 2012, a decrease of 3.8%. The reduction in Bezeq Group revenues was primarily due to a decrease in cellular segment revenues. Nevertheless, the Bezeq Group results reflect a moderation in the quarter-over-quarter decrease in Pelephone’s revenues, relative stability in the revenues of Bezeq Fixed-line and an increase in the revenues of Bezeq International.

The Bezeq Group’s focused policy of initiating streamlining and efficiency measures in all segments, contributed to the increase in profitability metrics.

Operating profit of the Bezeq Group in the third quarter of 2013 amounted to NIS 721 million ($ 204 million) compared with NIS 667 million in the corresponding quarter of 2012, an increase of 8.1%.  

Earnings before interest, taxes, depreciation and amortization (EBITDA) of the Bezeq Group in the third quarter of 2013 amounted to NIS 1.05 billion ($ 297 million) (EBITDA margin of 43.8%) compared with NIS 1.03 billion (EBITDA margin of 41.1%) in the corresponding quarter of 2012, an increase of 2.3%.

Net profit attributable to Bezeq shareholders amounted to NIS 449 million ($127 million) compared with NIS 342 million in the corresponding quarter of 2012, an increase of 31.3%.

The third quarter results again show record levels of operating cash flow and the second highest free cash flow in the last few years. Cash flow from operating activities of the Bezeq Group in the third quarter of 2013 amounted to NIS 1.14 billion ($ 323 million) compared with NIS 1.02 billion in the corresponding quarter of 2012, an increase of 11.6%. Free cash flow of the Bezeq Group in the third quarter of 2013 amounted to NIS 876 million ($ 248 million) compared with NIS 754 million in the corresponding quarter of 2012, an increase of 16.2%.

Net financial debt of the Bezeq Group was NIS 8.58 billion ($ 2.43 billion) at September 30, 2013 compared with NIS 7.19 billion as of September 30, 2012.

Notes:

 

  1. A.      Convenience Translation to Dollars: For the convenience of the reader, certain of the reported NIS figures of September 30, 2013 have been presented in millions of U.S. dollars, translated at the representative rate of exchange as of September 30, 2013 (NIS 3.537 = 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.   

 

  1. 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 Company'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.

Condensed Consolidated Statements of Financial Position as at

(In millions)

      Convenience    
      translation into    
      U.S. dollars    
      (Note A)    
    September 30 September 30 September 30 December 31
    2013 2013 2012 2012
    NIS US$ NIS NIS

 

Assets          
Cash and cash equivalents   1,111 314 705  764
Investments, including derivative financial          
 instruments   1,783 504 1,743  1,655
Trade receivables, net   2,791 790  3,044  2,927
Other receivables   344 99  259  329
Inventory   122 34  149  123
Assets classified as held-for-sale   221 62  172 164
           
Total current assets   6,372 1,802 6,072 5,962
           
Investments, including derivative financial          
 instruments   90 25  94  90
Long-term trade and other receivables   700 198  1,193  1,074
Property, plant and equipment   6,584 1,862  6,811  6,911
Intangible assets   6,779 1,917  7,189  7,252
Deferred and other expenses   389 109  406  384
Investment in equity-accounted investee          
 (mainly loans)   1,000 283  984 1,005
Deferred tax assets   93 26  144 *128
           
Total non-current assets   15,635 4,420 16,821 16,844
           
Total assets   22,007 6,222 22,893 22,806

 

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 

Internet Gold – Golden Lines Ltd.

Condensed Consolidated Statements of Financial Position as at (cont’d)

 

(In millions)

      Convenience    
      translation into    
      U.S. dollars    
      (Note A)    
    September 30 September 30 September 30 December 31
    2013 2013 2012 2012
    NIS US$ NIS NIS

 

Liabilities          
Short-term bank credit, current maturities          
 of long-term liabilities and debentures   1,609 455  1,057  1,707
Trade payables   630 178  770  793
Other payables, including derivative          
 financial instruments   901 255 825  746
Dividend payable   1,366  669
Current tax liabilities   774 219  564  588
Provisions   124 35  172  145
Employee benefits   248 70  288  *251
           
Total current liabilities   4,286 1,212 5,042 4,899
           
Debentures   6,476 1,831  6,066  5,913
Bank loans   6,184 1,748  6,524  6,422
Loans from institutions and others   549 155  546  540
Dividend payable    326  –  
Employee benefits   258 73  228  *260
Other liabilities   81 23  86  67
Provisions   67 19  71  66
Deferred tax liabilities   1,082 306  1,107  1,159
           
Total non-current liabilities   14,697 4,155 14,954 14,427
           
Total liabilities   18,983 5,367 19,996 19,326
           
Equity          
Total equity attributable to equity holders          
 of the Company   (89) (25) (185) *(92)
Non-controlling interests   3,113 880 3,082 *3,572
           
Total equity   3,024 855 2,897 3,480
           
Total liabilities and equity   22,007 6,222 22,893 22,806

 

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 


 

Internet Gold – Golden Lines Ltd.

Condensed Consolidated Statements of Income for the

 

(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    
  2013 2013 2012 2013 2013 2012 2012
  NIS US$ NIS NIS US$ NIS NIS

 

Revenues 7,154 2,023 7,829 2,398 678 2,494 10,278
               
Cost and expenses              
Depreciation and amortization 1,508 426 2,267 527 149 757  2,367
Salaries 1,438 407 1,530 466 132 512  *1,980
General and operating expenses 2,610 738 3,016 890 251 964  3,997
Other operating (income)              
expenses, net (30) (8) 52 (1) 19  (1)
               
  5,526 1,563 6,865 1,882 532 2,252 8,343
               
Operating income 1,628 460 964 516 146 242 1,935
               
Financing expenses, net 311 88 344 138 39 124 *415
               
Income after financing              
 expenses, net 1,317 372 620 378 107 118 1,520
               
Share in losses of              
equity-accounted investee 195 55 233 88 25 92 245
               
Income before income tax 1,122 317 387 290 82 26 1,275
               
Income tax 428 121 279 143 40 75 *556
               
Net income (loss) for the period 694 196 108 147 42 (49) 719
               
Income (loss) attributable to:              
  Owners of the Company 18 5 (144) (32) (9) (62) *(37)
  Non-controlling interests 676 191 252 179 51 13 *756
               
Net income (loss) for the period 694 196 108 147 42 (49) 719
               
Earnings per share              
               
Net income (loss), basic 0.75 0.21 (7.52) (1.68) (0.47) (3.24) (1.97)
               
Net income (loss), diluted 0.70 0.20 (7.55) (1.70) (0.48) (3.24) (2.01)

 

*   Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. 

Internet Gold – Golden Lines Ltd.

Reconciliation for NON-IFRS Measures

EBITDA

The following is a reconciliation of the Bezeq Group’s operating income to EBITDA:

In millions

  Six months period ended Three months period ended Year ended  
  June 30 September 30 December 31  
    Convenience     Convenience    
    translation     translation    
    into     into    
    U.S. dollars     U.S. dollars    
    (Note A)     (Note A)    
  2013 2013 2012 2013 2013 2012 2012
  NIS US$ NIS NIS US$ NIS NIS
               
Operating income 1,505 416 1,596 721 204 667 *3,041
Depreciation and amortization 654 181 716 329 93 359 1,436
               
EBITDA 2,159 597 2,312 1,050 297 1,026 4,471
               

 

 

Free Cash Flow

 

The following table shows the calculation of the Bezeq Group’s free cash flow:

In millions

  Six months period ended Three months period ended Year ended
  June 30 September 30 December 31
    Convenience     Convenience    
    translation     translation    
    into     into    
    U.S. dollars     U.S. dollars    
    (Note A)     (Note A)    
  2013 2013 2012 2013 2013 2012 2012
  NIS US$ NIS NIS US$ NIS NIS
               
Cash flow from operating activities 2,074 573 1,988 1,143 323 1,024 4,014
Purchase of property, plant and equipment (497) (137) (700) (270) (76) (309) (1,271)
Investment in intangible assets and deferred expenses (93) (26) (142) (50) (14) (58) (269)
Proceeds from the sale of property, plant and equipment 166 46 69 53 15 97 305
               
Free cash flow 1,650 456 1,215 876 248 754 2,779