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Internet Gold Reports Fourth Quarter and Full Year 2012 Financial Results

  Internet Gold Reports Fourth Quarter and Full Year 2012 Financial Results

  *Continued On-Track Progress Driven By Bezeq’s Continued Strong Cash
    Generation -

Business Wire

RAMAT GAN, Israel -- March 14, 2013

Internet Gold – Golden Lines Ltd. (NASDAQ Global Market and TASE: IGLD) today
reported its financial results for the fourth quarter and year ended December
31, 2012.

Bezeq’s results: For the fourth quarter of 2012, the Bezeq Group reported
revenues of NIS 2.45 billion ($ 656 million) and operating profit of NIS 772
million ($ 207 million). Bezeq’s EBITDA for the fourth quarter totaled NIS 1.1
billion ($ 304 million), representing an EBITDA margin of 46%. Net income for
the period attributed to the shareholders of Bezeq totaled NIS 519 million ($
139 million). Bezeq's cash flow from operating activities totaled NIS 1
billion ($ 268 million) during the fourth quarter of 2012.

Cash Position: As of December 31, 2012,  Internet Gold’s unconsolidated cash
and cash equivalents totaled NIS 179 million ($ 48 million), its
unconsolidated gross debt was NIS 1 billion ($ 276 million) and its
unconsolidated net debt was NIS 850 million ($ 228 million).


Internet Gold's Unconsolidated Balance Sheet Data*

In millions

                                             Convenience
                                December 31,      translation into
                                                  U.S. dollars
                                                  (Note A)
                                2012   2011      2012
                                NIS     NIS       US$
Short term liabilities          137     135       37
Long term liabilities           892     985       239
Total liabilities               1,029   1,120     276
Cash and cash equivalents       179     343       48
Total net debt                  850     777       228

* Does not include the balance sheet of B Communications.


Dividends from Bezeq: On October 10, 2012, Internet Gold's subsidiary, B
Communications Ltd., received two dividend payments from Bezeq which together
totaled NIS 464 million ($ 124 million). These dividend payments included a
current dividend of NIS 309 million ($ 83 million), representing B
Communications' share of Bezeq’s net profit for the first half of 2012, and a
special dividend of NIS 155 million ($ 41 million), representing B
Communications' share of the fourth installment of six special NIS 500 million
($ 134 million) special dividend payments declared by Bezeq and approved by
its shareholders in 2011.

In accordance with Bezeq's dividend policy, its Board of Directors recommended
the distribution of 100% of profits for the second half of 2012 as a cash
dividend of NIS 861 million ($ 231 million) to shareholders. Together with the
regular dividend, Bezeq will make the fifth installment of the special
dividend of NIS 500 million ($ 134 million). The total dividend to be
distributed will be NIS 1.361 billion ($ 365 million, or approximately NIS
0.50 per share). The regular dividend, which is subject to shareholder
approval, is expected to be paid together with the special dividend on May 13,
2013 to shareholders of record as of May 1, 2013. B Communications share of
the dividend distribution is expected to be approximately NIS 422 million ($
113 million).

Internet Gold’s Fourth Quarter and Full Year Consolidated Financial Results

Internet Gold's revenues for the fourth quarter of 2012 were NIS 2,449 million
($ 656 million), an 8% decrease compared to NIS 2,650 million reported in the
fourth quarter of 2011. For the full year 2012, Internet Gold’s revenues
totaled NIS 10,278 million ($ 2,753 million), a 10% decrease compared to NIS
11,376 million reported in 2011. For both the current and the prior-year
periods, Internet Gold's revenues consisted almost entirely of its share of
Bezeq’s revenues.

During the fourth quarter of 2012, B Communications recorded net amortization
expenses related to its Bezeq purchase price allocation (“Bezeq PPA”) of NIS
160 million ($ 43 million).  From April 14, 2010, the acquisition date of its
interest in Bezeq, until the end of the fourth quarter of 2012, B
Communications has amortized approximately 55% 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 both its and Internet Gold’s audited financial reports,
as well as to future financial statements.

Financial expenses, net: Internet Gold’s unconsolidated net financial expenses
for the fourth quarter of 2012 were nil. These expenses consisted primarily of
expenses related to its publicly traded debentures, which totaled NIS 7
million ($ 2 million) that were offset by financial income of NIS 7 million ($
2 million) generated from short term investments. The decrease in financial
expenses recorded in the fourth quarter of 2012 was attributable to the 0.66%
decrease in the Israeli CPI, to which the Company’s debt is linked.

Internet Gold’s unconsolidated net financial expenses for 2012 were NIS 57
million ($ 15 million). These expenses consisted primarily of expenses related
to its publicly traded debentures, which totaled NIS 74 million ($ 20 million)
that were offset partially by financial income of NIS 19 million ($ 5 million)
generated from short term investments.

Internet Gold's net profit attributable to shareholders for the fourth quarter
totaled NIS 56 million ($ 15 million), compared to a net loss attributable to
shareholders of NIS 117 million reported in the fourth quarter of 2011. For
the full year 2012, Internet Gold’s net loss attributable to shareholders
totaled NIS 88 million ($ 24 million), compared to a net loss of NIS 266
million in 2011.


Internet Gold’s Unconsolidated Financial Results

In millions

                                  Convenience                     Convenience
               Quarter ended  translation   Year ended      translation
                  December 31,    into           December 31,     into
                                  U.S. dollars                    U.S. dollars
                                  (Note A)                        (Note A)
                  2012  2011     2012           2012   2011     2012
                  NIS    NIS      US$            NIS     NIS      US$
Revenues          -      -        -              -       -        -
Financial
expenses,         -      (10  )   -              (57 )   (83  )   (15     )
net
Other             (1 )   (12  )   -              (4  )   (10  )   (1      )
expenses
Interest in
Bcom's net        57    (95  )   15             (27 )   (173 )   (8      )
profit
(loss)
Net profit        56    (117 )   15             (88 )   (266 )   (24     )
(loss)

Comments of Management

Commenting on the results, Doron Turgeman, CEO of Internet Gold said, “Against
the backdrop of an exceedingly challenging communications market, the stable
platform and unique strength of Bezeq, our base asset, continued to prove its
long-term cash-generating power. Based on our strong base asset we believe the
current debt situation will improve in the future and we are confident in our
ability to service our debt. We currently have sufficient cash reserves on
hand to service our debt until September 2014 and we believe that our
subsidiary, B Communications, will be able to distribute dividends prior to
that date. In the quarters ahead, we will continue our efforts to strengthen
our financial stability and liquidity in order to improve our debt and equity
positions.”

The financial results presented in this press release are preliminary
unaudited financial results. The final and complete results for the fourth
quarter and full year ended December 31, 2012 will be published when the
Company publishes its audited financial reports and files its Annual Report on
Form 20-F for 2012.

Bezeq Group Results (Consolidated)

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

                                                          
Bezeq Group            Q4      Q4      Change  FY 2012  FY      Change
(consolidated)            2012     2011                        2011
                          (NIS millions)           (NIS millions)   
Revenues                  2,449   2,650    -7.6%    10,278   11,373   -9.6%
Operating profit          772      698      10.6%    3,035     3,242    -6.4%
EBITDA                    1,133    1,053    7.6%     4,471     4,637    -3.6%
EBITDA margin             46.3%    39.7%             43.5%     40.8%
Net profit
attributable to           519      524      -1.0%    1,858     2,066    -10.1%
Bezeq shareholders
Diluted EPS (NIS)      0.19    0.19    0.0%    0.68     0.76    -10.5%
Cash flow from
operating                 1,002    859      16.6%    4,014     3,186    26.0%
activities
Payments for              192      544      -64.7%   1,235     1,637    -24.6%
investments, net
Free cash flow ^1      810     315     157.1%  2,779    1,549   79.4%
Net debt/EBITDA           1.79     1.57              1.79      1.57
(end of period) ^2
Net
debt/shareholders'     3.25    2.75           3.25     2.75    
equity (end of
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 2012 amounted to NIS 10.28 billion compared to
NIS 11.37 billion in 2011, a decrease of 9.6%. The reduction in the Bezeq
Group’s revenues was primarily due to a decrease in revenues from its cellular
segment, specifically due to a reduction in revenues from handset sales
(decrease of NIS 704 million) together with a decrease in revenues from
cellular services (decrease of NIS 376 million). Bezeq Group’s revenues in the
fourth quarter of 2012 amounted to NIS 2.45 billion compared to NIS 2.65
billion in the corresponding quarter of 2011, a decrease of 7.6%.

Operating profit of the Bezeq Group in 2012 amounted to NIS 3.04 billion
compared to NIS 3.24 billion in 2011, a decrease of 6.4%. Earnings before
interest, taxes, depreciation and amortization (EBITDA) of the Bezeq Group in
2012 amounted to NIS 4.47 billion (EBITDA margin of 43.5%) compared to NIS
4.64 billion (EBITDA margin of 40.8%) in 2011, a decrease of 3.6%. Net profit
attributable to Bezeq’s shareholders amounted to NIS 1.86 billion compared to
NIS 2.07 billion in 2011, a decrease of 10.1%. Overall, the decline in
profitability metrics was due to a decrease in profitability of the cellular
segment, partially offset by a decrease in a provision for employee
retirement.

Operating profit of the Bezeq Group in the fourth quarter of 2012 amounted to
NIS 772 million, compared to NIS 698 million in the corresponding quarter of
2011, an increase of 10.6%. EBITDA of the Bezeq Group in the fourth quarter of
2012 amounted to NIS 1.13 billion (EBITDA margin of 46.3%), compared to NIS
1.05 billion (EBITDA margin of 39.7%) in the corresponding quarter of 2011, an
increase of 7.6%. The increase in operating profit and EBITDA was primarily
due to an increase in gains from the sale of real estate and copper as well as
a reduction in a provision for employee retirement compared to the fourth
quarter of 2011. Net profit attributable to Bezeq’s shareholders in the fourth
quarter of 2012 amounted to NIS 519 million compared to NIS 524 million in the
corresponding quarter of 2011, a decrease of 1.0%. The minor decline in net
profit was due to the increase in corporate tax expenses.

Cash flow from operating activities of the Bezeq Group in 2012 amounted to NIS
4.01 billion compared to NIS 3.19 billion in 2011, an increase of 26.0%. Cash
flow from operating activities of the Bezeq Group in the fourth quarter of
2012 amounted to NIS 1.00 billion compared to NIS 859 million in the
corresponding quarter of 2011, an increase of 16.6%. The increase was
primarily due to improved working capital in the cellular segment as a result
of a decrease in trade receivables.

Free cash flow of the Bezeq Group in 2012 amounted to NIS 2.78 billion
compared to NIS 1.55 billion in 2011, an increase of 79.4%. Free cash flow of
the Bezeq Group in the fourth quarter of 2012 amounted to NIS 810 million
compared to NIS 315 million in the corresponding quarter of 2011, an increase
of 157.1%. The increase in free cash flow was due to an increase in cash flow
from operating activities as well as the completion of major infrastructure
projects initiated in prior years specifically Bezeq’s NGN and submarine
cable.

As of December 31, 2012, the Bezeq Group’s gross financial debt was NIS 9.55
billion, compared to NIS 9.58 billion as of December 31, 2011. The Bezeq
Group’s net financial debt was NIS 8.00 billion compared with NIS 7.28 billion
as of December 31, 2011. At December 31, 2012, the Bezeq Group's net financial
debt to EBITDA ratio was 1.79, compared with 1.57 at December 31, 2011.

Notes:

     
         Convenience Translation to Dollars: For the convenience of the
         reader, certain of the reported NIS figures of December 31, 2012 have
         been presented in millions of U.S. dollars, translated at the
A.       representative rate of exchange as of December 31, 2012 (NIS 3.733 =
         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
         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.


Internet Gold - Golden Lines Ltd.
Consolidated Statements of Financial Position as at December 31

(In millions)
                                                       
                                                              Convenience
                                                              translation into
                                                              U.S. dollars
                                                              $1 = NIS 3.733
                                        2011       2012       2012
                                        NIS        NIS        US$
                                                              
Assets
Cash and cash equivalents               1,447      869        233
Investments including derivatives       1,548      1,550      415
Trade receivables                       3,059      2,927      784
Other receivables                       294        332        89
Inventory                               204        123        33
Assets classified as                    167        164        44
held-for-sale
                                                              
Total current assets                    6,719      5,965      1,598
                                                              
                                                              
Investments including derivatives       119        90         24
Long-term trade and other               1,499      1,074      288
receivables
Property, plant and equipment           7,143      6,630      1,776
Intangible assets                       8,085      7,091      1,900
Deferred and other expenses             412        401        107
Investment in equity - accounted        1,059      1,005      269
investees (mainly loans)
Deferred tax assets                     223        126        34
                                                              
Total non-current assets                18,540     16,417     4,398
                                                              
Total assets                            25,259     22,382     5,996
                                                              


Internet Gold - Golden Lines Ltd.
Consolidated Statements of Financial Position as at December 31

(In millions)

                                                              Convenience
                                                       translation into
                                                              U.S. dollars
                                                              $1 = NIS 3.733
                                        2011       2012       2012
                                        NIS        NIS        US$
                                                              
Liabilities
Short term bank credit, current
maturities of long-term
liabilities and debentures              1,306      1,676      449
Trade payables                          892        793        212
Other payables including                846        746        200
derivatives
Dividend payable                        669        669        179
Current tax liabilities                 499        545        146
Provisions                              186        155        42
Employee benefits                       389        258        69
                                                              
Total current liabilities               4,787      4,842      1,297
                                                              
Debentures                              6,388      5,906      1,581
Bank loans                              6,753      6,453      1,729
Loans from institutions and             544        540        145
others
Dividend payable                        636        -          -
Employee benefits                       229        246        66
Other liabilities                       186        67         18
Provisions                              69         66         18
Deferred tax liabilities                1,426      1,054      282
                                                              
Total non-current liabilities           16,231     14,332     3,839
                                                              
Total liabilities                       21,018     19,174     5,136
                                                              
Equity
Total deficit attributable to           (27)       (132)      (35)
Company's shareholders
Non controlling interest                4,268      3,340      895
Total equity                            4,241      3,208      860
                                                              
Total liabilities and equity            25,259     22,382     5,996
                                                              


Internet Gold - Golden Lines Ltd.
Consolidated Statements of income for the year ended December 31

(In millions except per share data)

                                                              Convenience
                                                       translation into
                                                              U.S. dollars
                                                              $1 = NIS 3.733
                                       2011        2012       2012
                                       NIS         NIS        US$
                                                              
Revenues                               11,376      10,278     2,753
                                                              
Cost and expenses
Depreciation and amortization          2,984       2,805      751
Salaries                               2,122       1,986      532
General and operating expenses         4,468       3,994      1,069
Other operating expenses               323         (16)       (4)
(income), net
                                                              
                                       9,897       8,769      2,348
                                                              
Operating income                       1,479       1,509      405
                                                              
Finance expenses, net                  580         433        116
                                                              
Income after financing expenses,       899         1,076      289
net
                                                              
Share in losses of equity -            216         245        66
accounted investees
                                                              
Income before income tax               683         831        223
                                                              
Income tax                             653         406        109
                                                              
Net income for the year                30          425        114
                                                              
Income (loss) attributable to:
Owners of the Company                  (266)       (88)       (23)
Non-controlling interest               296         513        137
                                                              
Net income for the year                30          425        114
                                                              
Loss per share, basic                  (13.56)     (4.68)     (1.25)
                                                              
Loss per share, diluted                (13.60)     (4.70)     (1.26)
                                                              


Internet Gold - Golden Lines Ltd.
Reconciliation for NON-IFRS Measures
EBITDA

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

In millions

                                                              Convenience
                                                         translation into
                                                              U.S. dollars
                                                              $1 = NIS 3.733
                                                              Year ended
                                  Year ended December 31,     December 31,
                                  2011          2012        2012
                                  NIS             NIS         US$
                                                              
Operating income                  3,242           3,035       813
Depreciation and                  1,395           1,436       385
amortization
                                                              
EBITDA                            4,637           4,471       1,198
                                                              


Free Cash Flow
The following table shows the calculation of the Bezeq Group free cash flow:
In millions

                                                         Convenience
                                                              translation into
                                                              U.S. dollars
                                                              $1 = NIS 3.733
                                                              Year ended
                                  Year ended December 31,     December 31,
                                  2011         2012         2012
                                  NIS            NIS          US$
                                                              
Cash flow from operating          3,186          4,014        1,075
activities
Purchase of property, plant
and                               (1,548)        (1,271)      (341)
equipment
Investment in intangible
assets and                        (355)          (269)        (72)
deferred expenses
Proceeds from the sale of
property,
plant and equipment and           266            305          82
refund from
the Ministry of
Communications
                                                              
Free cash flow                    1,549          2,779        744

Contact:

Internet Gold – Golden Lines 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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