Internet Gold Reports First Quarter 2012 Financial Results

  Internet Gold Reports First Quarter 2012 Financial Results

- Company Enters 2012 with Continued Steady Progress Driven by On-Track Bezeq
                                Performance -

Business Wire

RAMAT GAN, Israel -- May 09, 2012

Internet Gold Ltd. (NASDAQ Global Select Market and TASE: IGLD) ("Internet
Gold" or "The Company”) today reported its financial results for the quarter
ended March 31, 2012.

Bezeq - On-Track Performance: The Bezeq Group reported another stable quarter,
delivering revenues of NIS 2.7 billion ($ 738 million) and operating profit of
NIS 850 million ($ 229 million) for the period. Bezeq’s EBITDA for the first
quarter of 2012 totaled NIS 1.2 billion ($ 323 million), representing an
EBITDA margin of 44.1%. Net profit attributable to Bezeq shareholders for the
period totaled NIS 582 million ($ 157 million).

Dividend from Bezeq: On April 24, 2012, the general meeting of Bezeq's
shareholders approved a dividend distribution of NIS 1,074 million ($ 289
million) to Bezeq's shareholders of record on May 4, 2012. The dividend, which
is in line with Bezeq’s stated dividend distribution policy, is expected to be
paid on May 21, 2012. Internet Gold’s subsidiary, B Communications Ltd., is
expected to receive approximately NIS 334 million ($ 90 million) representing
its share of the dividend.

On May 21, 2012, Bezeq is also expected to distribute the third NIS 500
million installment of the NIS 3.0 billion special dividend that was approved
by its shareholders on January 24, 2011. Accordingly, B Communications expects
to receive an additional NIS 155 million ($ 42 million) on the payment date,
representing its share of the special dividend. On March 29, 2012 and on April
4, 2012, objections were filed with the Economic Division of the Tel Aviv
District Court, opposing the continued payments of such distribution. Both
objections were filed by holders of B Communications Debentures (Series 5),
who filed similar objections in the second half of 2011. Bezeq denied the
arguments set forth in the objections and asserted that there is no basis for
the relief sought. The Court heard the closing arguments on the objections on
May 2, 2012.

Cash Position: As of March 31, 2012,Internet Gold’s unconsolidated cash and
cash equivalents totaled NIS 325 million ($ 87 million), its unconsolidated
total debt was NIS 1.1 billion ($ 304 million), and its net debt totaled NIS
806 million ($ 217 million).

Internet Gold Unconsolidated Balance Sheet Data*
                           
                              As of March 31, 2012
                              (NIS millions)   (US dollars in
                                                 millions)
Short term liabilities        133                36
Long term liabilities         998                268
Total liabilities             1,131              304
Cash and cash equivalents     325                87
Total net debt                806                217

* Does not include the balance sheet of B Communications

Internet Gold’s First Quarter Consolidated Financial Results

Internet Gold’s revenues for the first quarter were NIS 2,740 million ($ 738
million), a 5.9% decrease compared with NIS 2,913 million ($ 784 million)
reported in the first quarter of 2011. For both the current and the prior-year
periods, Internet Gold’s revenues consisted almost entirely of Bezeq’s
revenues.

Internet Gold’s net income attributable to shareholders for the first quarter
totaled NIS 3 million ($ 1 million), compared to a net loss attributable to
shareholders of NIS 64 million ($ 17 million) in the first quarter of 2011.
Internet Gold’s net income 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 interest 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. We and B Communications are 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 first quarter of 2012, we recorded NIS 302 million (US$ 81
    million) net, in amortization expenses related to the Bezeq purchase price
    allocation (“Bezeq PPA”).From the date of acquisition of the controlling
    interest in Bezeq (April 14, 2010) until the end of the first quarter of
    2012, we amortized approximately 44% of the total Bezeq PPA. We expect to
    amortize an additional 13% over the next three quarters of 2012.

    The Bezeq PPA amortization expense is a non-cash expense which 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 in
    the first quarter of 2012 totaled NIS 9 million ($ 2 million). These
    expenses consisted of NIS 15 million ($ 4 million) of interest on its
    outstanding debentures, which were partially offset by NIS 6 million ($ 2
    million) in income from marketable securities. In addition Internet Gold
    recorded its share of B Communications financial expenses that totaled NIS
    58 million ($ 16 million) for the period (including NIS 53 million ($ 14
    million) of interest on the long-term loans incurred to finance the Bezeq
    acquisition and NIS 12 million ($ 3 million) in expenses related to B
    Communications’ debentures).

Internet Gold’s Unconsolidated Financial Results

                              Q1 2012
                                (NIS millions)   (US dollars in
                                                   millions)
Revenues                        -                  -
Financial expenses              (9)                (2)
Other expenses                  (1)                -
Interest in BCOM's net loss     13                 3
Net loss                        3                  1

Comments of Management

Commenting on the results, Mr. Doron Turgeman, the CEO of Internet Gold, said,
“As we move into 2012, we continue to be very pleased with all aspects of the
Bezeq acquisition, which generates a steady return that continues to enhance
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's Q1 Consolidated Results

Revenues of the Bezeq Group in the first quarter of 2012 amounted to NIS 2.74
billion compared with NIS 2.91 billion in the corresponding quarter of 2011, a
decrease of 5.9%. Most of the decrease in the Bezeq Group's revenues is due to
the erosion of revenues from cellular services and from the sale of cellular
handsets.

Operating profit of the Bezeq Group amounted to NIS 850 million in the first
quarter of 2012, compared with NIS 665 million in the corresponding quarter of
2011, an increase of 27.8%. EBITDA in the first quarter of 2012 was NIS 1.21
billion (EBITDA margin of 44.1%), compared with NIS 1 billion (EBITDA margin
of 34.3%) in the corresponding quarter of 2011, an increase of 20.8%.

The increase in operating profit and EBITDA is primarily attributable to a
provision of NIS 281.5 million for employee retirement expenses recorded in
the first quarter of 2011 and the absence of a similar provision in the
current quarter.

Net profit attributable to Bezeq shareholders increased by 43.0% and amounted
to NIS 582 million in the first quarter of 2012, compared with NIS 407 million
in the corresponding quarter of 2011. The increase in net profit is primarily
attributable to the provision for employee retirement expenses recorded in the
first quarter of 2011, as noted above. In addition, Bezeq recorded a gain of
NIS 44 million in the first quarter of 2012 from the sale of assets by the
Stage One Venture Capital Fund, in which it holds a 71.8% interest.

Cash flow from operating activities of the Bezeq Group in the first quarter of
2012 increased by 28.8% and amounted to NIS 998 million compared with NIS 775
million in the corresponding quarter of 2011.

Gross capital expenditures (CAPEX) amounted to NIS 462 million in the first
quarter of 2012 compared with NIS 513 million the corresponding quarter in
2011, a decrease of 9.9%. The decrease is due to lower investments in
fixed-line operations as the NGN project progresses. The Bezeq Group's CAPEX
to consolidated revenues ratio in the first quarter of 2012 was 16.9%,
compared with 17.6% in the corresponding quarter of 2011.

As a result of the improved cash flow from operating activities and the
decrease in CAPEX payments, free cash flow increased by 26.6% and amounted to
NIS 585 million in the first quarter of 2012, compared with NIS 462 million in
the corresponding quarter of 2011.

As of March 31, 2012, the gross financial debt of the Bezeq Group was NIS 9.42
billion, compared with NIS 5.64 billion as of March 31, 2011. The net
financial debt of the Bezeq Group was NIS 6.65 billion compared with NIS 4.94
billion as of March 31, 2011. At the end of March 2012, the Bezeq Group's net
debt to EBITDA ratio was 1.37, compared with 1.00 at the end of March 2011.

Bezeq Group (consolidated)                    Q1 2012   Q1 2011   Change
                                                (NIS millions)
Revenues                                        2,740       2,913       -5.9 %
Operating profit                                850         665         27.8 %
EBITDA                                          1,208       1,000       20.8 %
EBITDA margin                                   44.1  %     34.3  %
Net profit attributable to Company              582         407         43.0 %
shareholders
Diluted EPS (NIS)                             0.21     0.15     40.5 %
Cash flow from operating activities             998         775         28.8 %
CAPEX payments, net^1                           413         313         31.9 %
Free cash flow^2                              585      462      26.6 %
Net debt/EBITDA (end of period)^3               1.37        1.00
Net debt/shareholders' equity (end of         2.05     1.66     
period)

^1  CAPEX data reflects payments related to capex and are based on the cash
     flow statements.
^2   Free cash flow is defined as cash flows from operating activities less
     net capex payments.
^3   EBITDA in this calculation refers to the trailing twelve months.

To provide further insight into its results, the Company has provided the
following summary of the consolidated financial report of the Bezeq Group’s
quarter ended March 31, 2012. For a full discussion of Bezeq’s results for the
quarter, please refer to http://ir.bezeq.co.il.

Notes:

     Convenience Translation to Dollars: For the convenience of the reader,
     certain of the reported NIS figures of March 31, 2012 have been presented
     in millions of U.S. dollars, translated at the representative rate of
A.  exchange as of March 31, 2012 (NIS 3.715 = 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.

     Use of non-IFRS Measurements: We and the Bezeq Group’s management
     regularly use supplemental non-IFRS financial measures internally to
B.   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.eurocom.co.il
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 Internet Gold’s filings with the Securities and
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.

Internet Gold – Golden Lines Ltd.
Consolidated Statements of Financial Position as at
                                                      
                                                              Convenience
                                                              translation into
                                                              U.S. dollars
                                                              $1 = NIS 3.715
                                    March 31                  March 31
                                    2011           2012       2012
                                    NIS millions              $ millions
Assets                           
Cash and cash equivalents           706            1,509      406
Investments including               782            1,978      532
derivatives
Trade receivables                   2,787          3,130      843
Other receivables                   276            357        96
Inventory                           246            225        61
Assets classified as                38             168        45
held-for-sale
                                                              
Total current assets                4,835          7,367      1,983
                                                              
Investments including               129            101        27
derivatives
Long-term trade and other           1,299          1,442      388
receivables
Property, plant and equipment       7,402          7,076      1,905
Intangible assets                   9,581          7,824      2,106
Deferred and other expenses         637            410        110
Investment in equity - accounted    1,068          1,041      280
investees (mainly loans)
Deferred tax assets                 299            188        51
                                                              
Total non-current assets            20,415         18,082     4,867
                                                              
Total assets                        25,250         25,449     6,850
                                                              

Internet Gold – Golden Lines Ltd.
Consolidated Statements of Financial Position as at
                                                     
                                                              Convenience
                                                              translation into
                                                              U.S. dollars
                                                              $1 = NIS 3.715
                                  March 31                    March 31
                                  2011           2012         2012
                                  NIS millions                $ millions
Liabilities
Short term bank credit,
current maturities of             1,474          1,216        327
long-term liabilities and
debentures
Trade payables                    1,035          895          241
Other payables including          1,131          987          266
derivatives
Dividend payable                  675            677          182
Current tax liabilities           396            570          154
Deferred income                   34             56           15
Provisions                        260            181          49
Employee benefits                 538            358          96
Liabilities classified as         9              -           -          
held-for-sale
                                                              
Total current liabilities         5,552          4,940       1,330      
                                                              
Debentures                        3,455          6,375        1,716
Bank loans                        6,070          6,835        1,840
Loans from institutions and       542            541          146
others
Dividend payable                  1,254          645          173
Employee benefits                 267            229          62
Other liabilities                 153            77           21
Provisions                        69             69           18
Deferred tax liabilities          1,561          1,319       355        
                                                              
Total non-current liabilities     13,371         16,090      4,331      
                                                              
Total liabilities                 18,923         21,030      5,661      
                                                              
Equity
Total equity attributable to      77             (32    )     (9         )
Company's shareholders
Non controlling interest          6,250          4,451       1,198      
Total equity                      6,327          4,419       1,189      
                                                              
Total liabilities and equity      25,250         25,449      6,850      
                                                                         

Internet Gold – Golden Lines Ltd.
Consolidated Statements of income for the three months period ended March 31
                                                     
                                                              Convenience
                                                              translation into
                                                              U.S. dollars
                                                              $1 = NIS 3.715
                                    2011            2012      2012
                                    NIS millions              $ millions
                                                              
Revenues                            2,914          2,740     738
                                                              
Cost and expenses
Depreciation and amortization       700             755       203
Salaries                            535             512       138
General and operating expenses      1,133           1,083     292
Other operating expenses, net       247            -         -
                                                              
                                    2,615          2,350     633
                                                              
Operating income                    299             390       105
                                                              
Finance expenses, net               134            19        5
                                                              
Income after financing              165             371       100
expenses, net
                                                              
Share in losses of equity –         65             58        16
accounted investees
                                                              
Income before income tax            100             313       84
                                                              
Income tax                          88             131       35
                                                              
Net income for the year             12             182       49
                                                              
Income (loss) attributable to:
Owners of the Company               (64   )         3         1
Non-controlling interest            76             179       48
                                                              
Net income for the year             12             182       49
                                                              
Profit (loss) per share, basic      (3.45 )         0.16      0.04
                                                              
Profit (loss) per share,            (3.47 )         0. 15     0.04
diluted

Contact:

Internet Gold Ltd.
Idit Cohen – IR Manager
+972-3-924-0000
idit@igld.com
or
Investor relations contact:
Mor Dagan - Investor Relations
+972-3-516-7620
mor@km-ir.co.il
 
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