Internet Gold Reports Financial Results for the Third Quarter of 2013

  Internet Gold Reports Financial Results for the Third Quarter of 2013

            Maintaining sufficient liquidity for the coming years

Business Wire

RAMAT GAN, Israel -- November 7, 2013

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

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

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

Internet Gold's Unconsolidated Balance Sheet Data*

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

* Does not include the balance sheet of B Communications.

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

Internet Gold’s Third Quarter Financial Results

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

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

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

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

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

Internet Gold’s Unconsolidated Financial Results

                                                              
  In millions                      Convenience
                                   translation
                                   into
                                   U.S. dollars
                                   (Note A)
                   Three-month     Three-month      Three-month
                   period ended    period ended     period ended    Year ended
                   September 30,   September 30,    September 30,   December
                                                                    31,
                   2013            2013             2012            2012
                   NIS             US$              NIS             NIS
  Revenues         -               -                -               -
  Financial        (41      )      (12       )      (17      )      (60    )
  expenses
  Other expenses   (1       )      -                (1       )      (14    )
  Interest in
  BCOM's net       10             3               (44      )      37     
  income (loss)
  Net income       32             9               (62      )      (37    )
  (loss)
                                                                    

Comments of Management

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

Bezeq Group Results (Consolidated)

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

                                                             
  Bezeq Group (consolidated)         Q3 2013       Q3 2012       % change
                                      (NIS millions)
  Revenues                            2,398          2,494          -3.8%
  Operating profit                    721            667            8.1%
  EBITDA                              1,050          1,026          2.3%
  EBITDA margin                       43.8%          41.1%
  Net profit attributable to          449            342            31.3%
  Company shareholders
  Diluted EPS (NIS)                  0.16          0.13          23.1%
  Cash flow from operating            1,143          1,024          11.6%
  activities
  Payments for investments, net       267            270            -1.1%
  Free cash flow ^1                  876           754           16.2%
  Net debt/EBITDA (end of            1.97          1.64          
  period) ^2
                                                                    
  ^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 third quarter of 2013 amounted to NIS 2.40
billion ($ 679 million) compared with NIS 2.49 billion in the corresponding
quarter of 2012, a decrease of 3.8%. The reduction in Bezeq Group revenues was
primarily due to a decrease in cellular segment revenues. Nevertheless, the
Bezeq Group results reflect a moderation in the quarter-over-quarter decrease
in Pelephone's revenues, relative stability in the revenues of Bezeq
Fixed-line and an increase in the revenues of Bezeq International.

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

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

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

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

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

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

Notes:

     Convenience Translation to Dollars: For the convenience of the reader,
     certain of the reported NIS figures of September 30, 2013 have been
     presented in millions of U.S. dollars, translated at the representative
A.  rate of exchange as of September 30, 2013 (NIS 3.537 = U.S. Dollar 1.00).
     The U.S. dollar ($) amounts presented should not be construed as
     representing amounts receivable or payable in U.S. dollars or convertible
     into U.S. dollars, unless otherwise indicated.

     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:
BCOM)(Nasdaq: BCOM), which in turn holds the controlling interest in Bezeq,
The Israel Telecommunication Corp., Israel’s largest telecommunications
provider (TASE: BEZQ). 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.
  
  Condensed Consolidated Statements of Financial Position as at
  (In millions)
                                                                 
                                          Convenience
                                          translation
                                          into
                                          U.S. dollars
                                          (Note A)
                              September   September 30    September   December
                              30                          30          31
                              2013        2013            2012        2012
                              NIS         US$             NIS         NIS
  Assets
  Cash and cash equivalents   1,111       314             705         764
  Investments, including
  derivative financial
  instruments                 1,783       504             1,743       1,655
  Trade receivables, net      2,791       790             3,044       2,927
  Other receivables           344         99              259         329
  Inventory                   122         34              149         123
  Assets classified as        221         62              172         164
  held-for-sale
                                                                      
  Total current assets        6,372       1,802           6,072       5,962
                                                                      
  Investments, including
  derivative financial
  instruments                 90          25              94          90
  Long-term trade and other   700         198             1,193       1,074
  receivables
  Property, plant and         6,584       1,862           6,811       6,911
  equipment
  Intangible assets           6,779       1,917           7,189       7,252
  Deferred and other          389         109             406         384
  expenses
  Investment in
  equity-accounted investee
  (mainly loans)              1,000       283             984         1,005
  Deferred tax assets         93          26              144         *128
                                                                      
  Total non-current assets    15,635      4,420           16,821      16,844
                                                                      
  Total assets                22,007      6,222           22,893      22,806
                                                                      

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

 Internet Gold – Golden Lines Ltd.
  
  Condensed Consolidated Statements of Financial Position as at (cont’d)
  (In millions)
                                                                 
                                          Convenience
                                          translation
                                          into
                                          U.S. dollars
                                          (Note A)
                              September   September 30    September   December
                              30                          30          31
                              2013        2013            2012        2012
                              NIS         US$             NIS         NIS
  Liabilities
  Short-term bank credit,
  current maturities of       1,609       455             1,057       1,707
  long-term liabilities and
  debentures
  Trade payables              630         178             770         793
  Other payables, including
  derivative financial        901         255             825         746
  instruments
  Dividend payable            -           -               1,366       669
  Current tax liabilities     774         219             564         588
  Provisions                  124         35              172         145
  Employee benefits           248         70              288         *251
                                                                      
  Total current liabilities   4,286       1,212           5,042       4,899
                                                                      
  Debentures                  6,476       1,831           6,066       5,913
  Bank loans                  6,184       1,748           6,524       6,422
  Loans from institutions     549         155             546         540
  and others
  Dividend payable            -           -               326         -
  Employee benefits           258         73              228         *260
  Other liabilities           81          23              86          67
  Provisions                  67          19              71          66
  Deferred tax liabilities    1,082       306             1,107       1,159
                                                                      
  Total non-current           14,697      4,155           14,954      14,427
  liabilities
                                                                      
  Total liabilities           18,983      5,367           19,996      19,326
                                                                      
  Equity
  Total equity attributable
  to equity holders of the    (89)        (25)            (185)       *(92)
  Company
  Non-controlling interests   3,113       880             3,082       *3,572
                                                                      
  Total equity                3,024       855             2,897       3,480
                                                                      
  Total liabilities and       22,007      6,222           22,893      22,806
  equity
                                                                      

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

 Internet Gold – Golden Lines Ltd.
  
  Condensed Consolidated Statements of Income for the
  (In millions, except per share data)
                                                                                
                     Nine months period ended       Three months period ended       Year
                                                                                    ended
                     September 30                   September 30                    December
                                                                                    31
                            Convenience                   Convenience 
                             translation                     translation
                             into                            into
                             U.S.                            U.S.
                             dollars                         dollars
                     2013    2013          2012     2013     2013          2012     2012
                     NIS     US$           NIS      NIS      US$           NIS      NIS
  Revenues           7,154   2,023         7,829    2,398    678           2,494    10,278
                                                                                    
  Cost and
  expenses
  Depreciation and   1,508   426           2,267    527      149           757      2,367
  amortization
  Salaries           1,438   407           1,530    466      132           512      *1,980
  General and
  operating          2,610   738           3,016    890      251           964      3,997
  expenses
  Other operating
  (income)           (30)    (8)           52       (1)      -             19       (1)
  expenses, net
                                                                                    
                     5,526   1,563         6,865    1,882    532           2,252    8,343
                                                                                    
  Operating income   1,628   460           964      516      146           242      1,935
                                                                                    
  Financing          311     88            344      138      39            124      *415
  expenses, net
                                                                                    
  Income after
  financing          1,317   372           620      378      107           118      1,520
  expenses, net
                                                                                    
  Share in losses
  of                 195     55            233      88       25            92       245
  equity-accounted
  investee
                                                                                    
  Income before      1,122   317           387      290      82            26       1,275
  income tax
                                                                                    
  Income tax         428     121           279      143      40            75       *556
                                                                                    
  Net income
  (loss) for the     694     196           108      147      42            (49)     719
  period
                                                                                    
  Income (loss)
  attributable to:
  Owners of the      18      5             (144)    (32)     (9)           (62)     *(37)
  Company
  Non-controlling    676     191           252      179      51            13       *756
  interests
                                                                                    
  Net income
  (loss) for the     694     196           108      147      42            (49)     719
  period
                                                                                    
  Earnings per
  share
                                                                                    
  Net income         0.75    0.21          (7.52)   (1.68)   (0.47)        (3.24)   (1.97)
  (loss), basic
                                                                                    
  Net income         0.70    0.20          (7.55)   (1.70)   (0.48)        (3.24)   (2.01)
  (loss), diluted
                                                                                    

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

 Internet Gold – Golden Lines Ltd.
  
  Reconciliation for NON-IFRS Measures
  
  EBITDA
  
  The following is a reconciliation of the Bezeq Group’s operating income to
  EBITDA:
  
  In millions
                         
                                       Three months period ended
                                       September 30
                                                 Convenience    
                                                    translation
                                                    into
                                                    U.S. dollars
                                                    (Note A)
                                       2013         2013               2012
                                       NIS          US$                NIS
                                                                       
  Operating income                     721          204                667
  Depreciation and                     329          93                 359
  amortization
                                                                       
  EBITDA                               1,050        297                1,026
                                                                       

 Free Cash Flow
  
  The following table shows the calculation of the Bezeq Group’s free cash
  flow:
  
  In millions
                                             
                                                  Three months period ended
                                                  September 30
                                                       Convenience  
                                                          translation
                                                          into
                                                          U.S. dollars
                                                          (Note A)
                                                  2013    2013           2012
                                                  NIS     US$            NIS
                                                                         
  Cash flow from operating activities             1,143   323            1,024
  Purchase of property, plant and equipment       (270)   (76)           (309)
  Investment in intangible assets and             (50)    (14)           (58)
  deferred expenses
  Proceeds from the sale of property, plant       53      15             97
  and equipment
                                                                         
  Free cash flow                                  876     248            754
                                                                         

Contact:

Internet Gold
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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