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Internet Gold Reports Financial Results for the Third Quarter of 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-

Business Wire

RAMAT GAN, Israel -- November 08, 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     December     September     December
                             30,           31,          30,           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                312           343          80            87
equivalents
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          (17   )           (24   )       (4    )           (6    )
expenses
Other expenses     (1    )           (2    )       -                 -
Interest in
Bcom's net         (44   )           (26   )       (12   )           (7    )
loss
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.

Bezeq Group (consolidated)                     Q3 2012     Q3 2011     Change
                                               (NIS millions)
Revenues                                       2,494       2,917       -14.5 %
Operating profit                               667         944         -29.3 %
EBITDA                                         1,026       1,301       -21.1 %
EBITDA margin                                  41.1  %     44.6  %
Net profit attributable to Company             342         550         -37.8 %
shareholders
Diluted EPS (NIS)                              0.13        0.20        -35.0 %
Cash flow from operating activities            1,024       882         16.1  %
Payments for investments, net                  270         374         -27.8 %
Free cash flow ^1                              754         508         48.4  %
Net debt/EBITDA (end of period) ^2             1.64        1.24
Net debt/shareholders' equity (end of          3.69        2.93         
period)

^1   Free cash flow is defined as cash flows from operating activities less
     net payments for investments.
^2   EBITDA in this calculation refers to the trailing twelve months.
      

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:

     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
A.   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.
 
     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.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.

Internet Gold - Golden Lines Ltd.
Consolidated Statements of Financial Position
 
(In millions)
                                     Convenience                    
                                     translation
                                     into
                                     U.S.
                                     dollars
                     September       September       September       December
                     30              30              30              31
                     2012            2012            2011            2011
                     (Unaudited)     (Unaudited)     (Unaudited)     (Audited)
                     NIS             US$             NIS             NIS
                                                                      
Assets
Cash and cash        705             180             1,722           1,447
equivalents
Investments
including            1,743           446             2,721           1,548
derivatives
Trade                3,044           778             3,007           3,059
receivables
Other                259             66              236             294
receivables
Inventory            149             38              199             204
Assets
classified as        172             44              113             167
held-for-sale
                                                                      
Total current        6,072           1,552           7,998           6,719
assets
                                                                      
Investments
including            94              24              115             119
derivatives
Long-term trade      1,193           305             1,594           1,499
receivables
Property, plant      6,811           1,741           7,392           7,143
and equipment
Intangible           7,189           1,838           8,342           8,085
assets
Deferred and         406             104             385             412
other expenses
Investments in
equity-accounted     984             251             1,031           1,059
investee (mainly
loans)
Deferred tax         144             37              218             223
assets
                                                                      
Total
non-current          16,821          4,300           19,077          18,540
assets
                                                                      
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       September       September       December
                     30              30              30              31
                     2012            2012            2011            2011
                     (Unaudited)     (Unaudited)     (Unaudited)     (Audited)
                     NIS             US$             NIS             NIS
                                                                      
Liabilities
Short-term bank
credit, current
maturities of        1,057           270             1,567           1,306
long-term
liabilities and
debentures
Trade payables       770             197             919             892
Other payables
including            765             195             1,108           790
derivatives
Dividend payable     1,366           349             1,542           669
Current tax          564             144             432             499
liabilities
Deferred income      60              15              52              56
Provisions           172             44              220             186
Employee             288             74              467             389      
benefits
                                                                      
Total current        5,042           1,288           6,307           4,787    
liabilities
                                                                      
Debentures           6,066           1,551           6,445           6,388
Bank loans           6,524           1,668           6,876           6,753
Loans from
institutions and     546             140             548             544
others
Dividend payable     326             83              771             636
Employee             228             58              271             229
benefits
Other                86              22              156             186
liabilities
Provisions           71              18              70              69
Deferred tax         1,107           283             1,249           1,426    
liabilities
                                                                      
Total
non-current          14,954          3,823           16,386          16,231   
liabilities
                                                                      
Total                19,996          5,111           22,693          21,018   
liabilities
                                                                      
Equity
Total equity
attributable to      (185     )      (47     )       (14      )      (27     )
equity holders
of the Company
Non-controlling      3,082           788             4,396           4,268    
interest
                                                                      
Total equity         2,897           741             4,382           4,241    
                                                                      
Total
liabilities and      22,893          5,852           27,075          25,259   
equity
                                                                              
                                                                              

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.                                            U.S.
                                     dollars                                         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     2,267           579             2,113           757             194             714             2,984
amortization
Salaries             1,530           391             1,626           512             131             551             2,122
General and
operating            3,016           771             3,452           964             246             1,184           4,468
expenses
Other operating      52              13              277             19              5               1               323      
expenses, net
                                                                                                                      
                     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            344             88              473             124             32              186             580      
expenses, net
 
Income after
financing            620             159             785             118             30              281             899
expense, net
                                                                                                                      
Share in losses
of                   233             60              203             92              24              66              216      
equity-accounted
investee
                                                                                                                      
Income before        387             99              582             26              6               215             683
income tax
                                                                                                                      
Income tax           279             71              340             75              19              136             653      
                                                                                                                      
Net income           108             28              242             (49     )       (13     )       79              30       
(loss)
                                                                                                                      
Attributable to:
Owners of the        (144    )       (37     )       (149    )       (62     )       (16     )       (52     )       (266    )
Company
Non-controlling      252             65              391             13              3               131             296      
interest
Net income           108             28              242             (49     )       (13     )       79              30       
(loss)
                                                                                                                      
Net loss per         (7.52   )       (1.92   )       (7.94   )       (3.24   )       (0.83   )       (2.82   )       (13.56  )
share, basic
                                                                                                                      
Net loss per         (7.55   )       (1.93   )       (8.00   )       (3.24   )       (0.83   )       (2.84   )       (13.60  )
share, diluted
                                                                                                                      
                                                                                                                      

Contact:

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