B Communications Reports Financial Results for the Second Quarter of 2013 *3rd consecutive quarter of significant net income, totaling NIS 34M ($9M) - Business Wire RAMAT GAN, Israel -- August 5, 2013 B Communications Ltd. (NASDAQ Global Market and TASE: BCOM) today reported its financial results for the second quarter ended June 30, 2013. Bezeq’s Results: For the second quarter of 2013, the Bezeq Group reported revenues of NIS 2.4 billion ($ 650 million) and operating profit of NIS 744 million ($ 206 million). Bezeq’s EBITDA for the second quarter totaled NIS 1.1 billion ($ 296 million), representing an EBITDA margin of 46%. Net income for the period attributable to the shareholders of Bezeq totaled NIS 473 million ($ 131 million). Bezeq's cash flow from operating activities during the period totaled NIS 1.1 billion ($ 305 million). Cash Position: As of June 30, 2013, B Communications’ unconsolidated cash and cash equivalents totaled NIS 745 million ($ 206 million), its unconsolidated total debt was NIS 3.8 billion ($ 1.1 billion), and its net debt totaled NIS 3.1 billion ($ 857 million). B Communications’ Unconsolidated Balance Sheet Data* In millions Convenience translation into U.S. dollars (Note A) June 30, June 30, June 30, December 31, 2013 2013 2012 2012 NIS US$ NIS NIS Short term 560 155 431 587 liabilities Long term 3,284 908 3,689 3,511 liabilities Total liabilities 3,844 1,063 4,120 4,098 Cash and cash 745 206 400 694 equivalents Total net debt 3,099 857 3,720 3,404 * Does not include the balance sheet of Bezeq. Dividend from Bezeq: On May 13, 2013, B Communications received two dividend payments from Bezeq which together totaled NIS 421 million ($ 116 million). These dividend payments included a current dividend of NIS 266 million ($ 73 million), representing B Communications’ share of Bezeq’s net profit for the second half of 2012, and a special dividend of NIS 155 million ($ 43 million), representing B Communications’ share of the fifth installment of six special dividend payments declared by Bezeq and approved by its shareholders in 2011. B Communications’ Second Quarter Financial Results B Communications’ consolidated revenues for the second quarter of 2013 were NIS 2.4 billion ($ 650 million), a 9.4% decrease compared with NIS 2.6 billion reported in the second quarter of 2012. For both the current and the prior-year periods, B Communications’ consolidated revenues consisted entirely of Bezeq’s revenues. During the second quarter of 2013, B Communications recorded net amortization expenses related to its Bezeq purchase price allocation (“Bezeq PPA”) of NIS 157 million ($ 43 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 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 its audited financial reports, as well as to future financial statements. B Communications’ financial expenses, net: B Communications’ unconsolidated net financial expenses for the second quarter of 2013 totaled NIS 62 million ($ 17 million). These expenses consisted primarily of NIS 56 million ($ 15 million) of interest and CPI linkage expenses on the long-term loans incurred to finance the Bezeq acquisition and expenses of NIS 13 million ($ 4 million) related to its publicly-traded debentures. These expenses were offset in part by financial income of NIS 7 million ($ 2 million) generated by short term investments. Unconsolidated net financial expenses in the second quarter of 2013 decreased by 42.6% compared with the second quarter of 2012. The decrease is primarily attributable to lower interest and CPI linkage expenses due to the reduction in the amount of the outstanding bank debt that was incurred to purchase the Company’s controlling interest in Bezeq. In addition, lower inflation levels and floating interest rates in the second quarter of 2013 compared to the second quarter of 2012 contributed to the decrease in interest and CPI linkage expenses. B Communications’ net income attributable to shareholders for the second quarter of 2013 totaled NIS 34 million ($ 9 million), compared to a net loss of NIS 79 million in the second quarter of 2012. B Communications’ 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 June 30, June 30, June 30, December 31, 2013 2013 2012 2012 NIS US$ NIS NIS Revenues - - - - Financing (62 ) (17 ) (108 ) (239 ) expenses, net Other and income tax (2 ) (1 ) - (48 ) expenses PPA amortization, (49 ) (14 ) (100 ) (234 ) net Interest in Bezeq's net 147 41 129 567 income Net income 34 9 (79 ) 46 (loss) Comments of Management Commenting on the results, Doron Turgeman, CEO of B Communications' said, “The first half of 2013 was another stable period for Bezeq and continued strong operating results. With the continued on-schedule receipt of dividends from Bezeq, we have continued building our cash reserves and have recorded a third consecutive quarter of significant net income. We are currently examining a number of offers for re-structuring some of our outstanding loans as a key to improving our financial position while improving our repayment schedule and financial flexibility.” 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 second quarter ended June 30, 2013. For a full discussion of Bezeq’s results for the second quarter of 2013, please refer to its website: http://ir.bezeq.co.il. Bezeq Group (consolidated) Q2 2013 Q2 2012 % change (NIS millions) Revenues 2,351 2,595 -9.4 % Operating profit 744 746 -0.3 % EBITDA 1,070 1,104 -3.1 % EBITDA margin 45.5 % 42.5 % Net profit attributable to 473 415 14.0 % Company shareholders Diluted EPS (NIS) 0.17 0.15 13.3 % Cash flow from operating 1,102 990 11.3 % activities Payments for investments, 178 360 -50.6 % net Free cash flow ^1 924 630 46.7 % Net debt/EBITDA (end of 1.83 1.69 period) ^2 Net debt/shareholders' 3.09 3.07 equity (end of period) ^1 Free cash flow is defined as cash flow 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 second quarter of 2013 amounted to NIS 2.35 billion ($ 650 million) compared with NIS 2.60 billion in the corresponding quarter of 2012, a decrease of 9.4%. The reduction in the Bezeq Group revenues was primarily due to a decrease in revenues from the cellular segment revenues. The Bezeq Group's focused policy of initiating streamlining and efficiency measures in all segments, both in salaries and in general operating expenses moderated the decline in EBITDA. The decrease in depreciation expenses and the reduction in financing expenses contributed to the stability of operating profit and the increase in net profit. Operating profit of the Bezeq Group in the second quarter of 2013 amounted to NIS 744 million ($ 206 million) compared with NIS 746 million in the corresponding quarter of 2012, a decrease of 0.3%. Earnings before interest, taxes, depreciation and amortization (EBITDA) of the Bezeq Group in the second quarter of 2013 amounted to NIS 1.07 billion ($ 296 million) (EBITDA margin of 45.5%) compared with NIS 1.10 billion (EBITDA margin of 42.5%) in the corresponding quarter of 2012, a decrease of 3.1%. Net profit attributable to Bezeq shareholders amounted to NIS 473 million ($ 131 million) compared with NIS 415 million in the corresponding quarter of 2012, an increase of 14.0%. The second quarter results again show record levels of free cash flow. Cash flow from operating activities of the Bezeq Group in the second quarter of 2013 amounted to NIS 1.10 billion ($ 305 million) compared with NIS 990 million in the corresponding quarter of 2012, an increase of 11.3%. Free cash flow in the second quarter of 2013 amounted to NIS 924 million ($ 255 million) compared with NIS 630 million in the corresponding quarter of 2012, an increase of 46.7%. The increase in free cash flow was due to increased income from the sale of real estate and copper together with stabilization of lower levels of capital expenditures compared with the previous five years during which Bezeq completed the NGN and submarine cable projects. Net financial debt of the Bezeq Group was NIS 7.93 billion ($ 2.2 billion) at June 30, 2013 compared with NIS 7.90 billion as of June 30, 2012. Bezeq Group Dividend Announcement In accordance with the Bezeq Group dividend policy, its Board of Directors recommended the distribution of 100% of profits for the first half of 2013 as a cash dividend to shareholders of NIS 969 million ($268 million). Together with the aforementioned semi-annual dividend, the Bezeq Group will make the sixth and final payment of the special dividend of NIS 500 million ($138 million). The total dividend to be distributed will be NIS 1.469 billion ($406 million) (approximately NIS 0.54 per share). The semi-annual dividend, which is subject to shareholder approval, would be payable together with the special dividend on September 15, 2013. The ex-dividend date is September 3, 2013. Notes: Convenience Translation to Dollars: For the convenience of the reader, certain of the reported NIS figures of June 30, 2013 have been presented in millions of U.S. dollars, translated at the A. representative rate of exchange as of June 30, 2013 (NIS 3.618 = U.S. Dollar 1.00). The U.S. dollar ($) 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 our 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 B Communications Ltd. B Communications is a telecommunications-oriented holding company and its primary holding is its controlling interest in Bezeq, The Israel Telecommunication Corp., Israel’s largest telecommunications provider (TASE: BZEQ). B Communications shares are traded on NASDAQ and the TASE under the symbol BCOM. For more information please visit the following Internet sites: www.bcommunications.co.il www.ir.bezeq.co.il www.eurocom.co.il www.igld.com 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. B Communications Ltd. Condensed Consolidated Statements of Financial Position as at (In millions) Convenience translation into U.S. dollars (Note A) June 30 June 30 June 30 December 31 2013 2013 2012 2012 NIS US$ NIS NIS Assets Cash and cash 646 179 634 757 equivalents Investments, including derivative financial 2,105 582 996 1,484 instruments Trade receivables, net 2,863 791 3,115 2,927 Other receivables 339 94 347 330 Inventory 142 39 206 123 Assets classified as 241 67 163 164 held-for-sale Total current assets 6,336 1,752 5,461 5,785 Investments, including derivative financial 89 25 95 90 instruments Long-term trade and 817 226 1,324 1,074 other receivables Property, plant and 6,626 1,831 6,966 6,911 equipment Intangible assets 6,937 1,917 7,487 7,252 Deferred and other 394 108 409 384 expenses Investment in equity-accounted 1,015 281 1,019 1,005 investee (mainly loans) Deferred tax assets 66 18 *172 *128 Total non-current assets 15,944 4,406 17,472 16,844 Total assets 22,280 6,158 22,933 22,629 * Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. B Communications Ltd. Condensed Consolidated Statements of Financial Position as at (cont’d) (In millions) Convenience translation into U.S. dollars (Note A) June 30 June 30 June 30 December 31 2013 2013 2012 2012 NIS US$ NIS NIS Liabilities Short-term bank credit, current maturities of long-term liabilities 1,497 414 1,060 1,582 and debentures Trade payables 686 190 901 792 Other payables, including derivative financial instruments 669 185 719 734 Dividend payable 338 93 669 669 Current tax liabilities 732 202 572 588 Provisions 124 34 174 145 Employee benefits 273 75 *318 *251 Total current 4,319 1,193 4,413 4,761 liabilities Debentures 5,420 1,498 5,105 5,018 Bank loans 6,227 1,721 6,515 6,422 Loans from institutions 542 150 545 540 and others Dividend payable - - 322 - Employee benefits 256 71 *246 *260 Other liabilities 86 24 83 67 Provisions 67 19 70 66 Deferred tax liabilities 1,056 292 1,210 1,159 Total non-current 13,654 3,775 14,096 13,532 liabilities Total liabilities 17,973 4,968 18,509 18,293 Equity Total equity attributable to equity holders of the Company 1,052 290 *886 *960 Non-controlling 3,255 900 *3,538 *3,376 interests Total equity 4,307 1,190 4,424 4,336 Total liabilities and 22,280 6,158 22,933 22,629 equity * Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. B Communications Ltd. Condensed Consolidated Statements of Income for the (In millions, except per share data) Six months period ended Three months period ended Year ended June 30 June 30 December 31 Convenience Convenience translation translation into into U.S. U.S. dollars dollars 2013 2013 2012 2013 2013 2012 2012 NIS US$ NIS NIS US$ NIS NIS Revenues 4,756 1,315 5,335 2,351 650 2,595 10,278 Cost and expenses Depreciation and 1,008 279 1,510 516 143 785 2,367 amortization Salaries 969 268 1,017 469 130 505 *1,978 General and operating 1,720 475 2,051 831 230 969 3,995 expenses Other operating (income) expenses, net (29 ) (8 ) 33 12 3 33 (11 ) 3,668 1,014 4,611 1,828 506 2,292 8,329 Operating income 1,088 301 724 523 144 303 1,949 Financing 144 40 180 79 22 172 *355 expenses, net Income after financing expenses, net 944 261 544 444 122 131 1,594 Share in losses of equity-accounted 107 30 141 67 18 83 245 investee Income before 837 231 403 377 104 48 1,349 income tax Income tax 279 77 204 126 35 67 *556 Net income (loss) for the 558 154 199 251 69 (19 ) 793 period Income (loss) attributable to: Owners of the 95 26 (50 ) 34 9 (79 ) *46 Company Non-controlling 463 128 249 217 60 60 *747 interests Net income (loss) for the 558 154 199 251 69 (19 ) 793 period Earnings per share Net income 3.16 0.87 (1.69 ) 1.12 0.31 (2.66 ) 1.52 (loss), basic Net income 3.16 0.87 (1.70 ) 1.11 0.30 (2.66 ) 1.49 (loss), diluted * Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. B Communications Ltd. Reconciliation for NON-IFRS Measures EBITDA The following is a reconciliation of the Bezeq Group’s operating income to EBITDA: In millions Three months period ended June 30 Convenience translation into U.S. dollars (Note A) 2013 2013 2012 NIS US$ NIS Operating income 744 206 746 Depreciation and 326 90 358 amortization EBITDA 1,070 296 1,104 * Restated following the retrospective application of the amendment to IAS 19, Employee Benefits. Free Cash Flow The following table shows the calculation of the Bezeq Group’s free cash flow: In millions Three months period ended June 30 Convenience translation into U.S. dollars (Note A) 2013 2013 2012 NIS US$ NIS Cash flow from operating activities 1,102 305 990 Purchase of property, plant and (252 ) (70 ) (315 ) equipment Investment in intangible assets and (49 ) (14 ) (67 ) deferred expenses Proceeds from the sale of property, 123 34 22 plant and equipment Free cash flow 924 255 630 Contact: B Communications Ltd. Idit Cohen – IR Manager +972-3-924-0000 firstname.lastname@example.org or Investor relations contacts: Mor Dagan - Investor Relations +972-3-516-7620 email@example.com
B Communications Reports Financial Results for the Second Quarter of 2013
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