B Communications Reports its Financial Results for the Third Quarter of 2013 - Announces Dividend Distribution of NIS 102 Million ($ 29 Million) - Business Wire RAMAT GAN, Israel -- November 7, 2013 B Communications Ltd. (NASDAQ Global Market and TASE: BCOM) 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, B Communications’ unconsolidated cash and cash equivalents totaled NIS 1.36 billion ($ 384 million), its unconsolidated total debt was NIS 4.07 billion ($ 1.15 billion), and its net debt totaled NIS 2.71 billion ($ 767 million). B Communications’ 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 587 166 470 587 Long term liabilities 3,482 984 3,705 3,511 Total liabilities 4,069 1,150 4,175 4,098 Dividend receivable - - 464 - Cash and cash 1,359 384 389 694 equivalents Total net debt 2,710 766 3,322 3,404 * Does not include the balance sheet of Bezeq. Dividend from Bezeq: On September 15, 2013, B Communications 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. B Communications’ Third Quarter Financial Results B Communications’ 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, B Communications’ 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”) in its consolidated financial statements of NIS 198 million ($ 56 million). From April 14, 2010, the date of the acquisition of its interest in Bezeq, until September 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. B Communications’ financial expenses, net: B Communications’ unconsolidated net financial expenses for the third quarter of 2013 totaled NIS 62 million ($ 18 million). These expenses consisted primarily of NIS 62 million ($ 18 million) of interest and CPI linkage expenses on the long-term loans incurred to finance the Bezeq acquisition and expenses of NIS 14 million ($ 4 million) related to its publicly-traded debentures. These expenses were offset in part by financial income of NIS 11 million ($ 3 million) generated by short term investments. B Communications’ net income attributable to shareholders for the third quarter of 2013 was NIS 15 million ($ 4 million), compared to a net loss of NIS 55 million in the third 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 September September 30, September December 30, 30, 31, 2013 2013 2012 2012 NIS US$ NIS NIS Revenues - - - - Financing (62 ) (18 ) (65 ) (239 ) expenses, net Other and income tax (1 ) - (1 ) (48 ) expenses PPA amortization, (61 ) (17 ) (95 ) (234 ) net Interest in Bezeq's net 139 39 106 567 income Net income 15 4 (55 ) 46 (loss) Dividend On November 7, 2013, the Company's board of directors declared a cash dividend in the amount of NIS 3.41 per share, and in the aggregate amount of approximately NIS 102 million (approximately $ 0.96 per share and approximately $ 29 million in the aggregate, based on the representative rate of exchange on September 30, 2013. The actual US$ amount for dividend paid in US$ will be converted from NIS based upon the representative rate of exchange published by the Bank of Israel on November 18, 2013). The dividend will be payable to all of the Company’s shareholders of record at the end of the trading day on the NASDAQ Global Market on November 18, 2013. The payment date will be December 3, 2013. Comments of Management Commenting on the results, Mr. Doron Turgeman, B Communications’ CEO, stated, “We are very pleased with the quarter’s results, the fourth consecutive quarter in which we have reported net income. Now, after three successful years during which we decreased the Company’s debt from NIS 5.3 billion when we acquired Bezeq (in April 2010) to just NIS 2.7 million as of the end of the third quarter, we are advancing to the next phase. The financing agreement modification that we announced yesterday will provide us with a more convenient loan repayment schedule and increase our financial flexibility. This, together with the increase in liquidity that we achieved as a result of our recent issuance of NIS 180 million of additional Series B debt, will bring a significant improvement to our financial position and to our future cash flow.” Mr. Turgeman continued, “As a concrete demonstration of our confidence, the Board today decided to distribute a significant dividend for the first time. We see dividends as one of the ways of creating shareholder value over the long term.” 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 A. representative 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 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: BEZQ). 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) September September 30 September December 30 2013 30 31 2013 2012 2012 NIS US$ NIS NIS Assets Cash and cash 1,012 286 679 757 equivalents Investments, including derivative financial instruments 1,603 453 1,456 1,484 Trade receivables, net 2,791 789 3,044 2,927 Other receivables 345 98 261 330 Inventory 122 34 149 123 Assets classified as 221 63 164 164 held-for-sale Total current assets 6,094 1,723 5,753 5,785 Investments, including derivative financial instruments 90 25 94 90 Long-term trade and 701 198 1,193 1,074 other receivables Property, plant and 6,584 1,862 6,811 6,911 equipment Intangible assets 6,778 1,918 7,189 7,252 Deferred and other 389 110 406 384 expenses Investment in equity-accounted investee (mainly loans) 1,000 283 984 1,005 Deferred tax assets 93 26 144 *128 Total non-current 15,635 4,420 16,821 16,844 assets Total assets 21,729 6,143 22,574 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) September September 30 September December 30 30 31 2013 2013 2012 2012 NIS US$ NIS NIS Liabilities Short-term bank credit, current maturities of long-term liabilities and 1,484 419 934 1,582 debentures Trade payables 629 178 772 792 Other payables, including derivative financial 849 240 801 734 instruments Dividend payable - - 1,366 669 Current tax 774 219 564 588 liabilities Provisions 124 35 172 145 Employee benefits 248 70 288 * 251 Total current 4,108 1,161 4,897 4,761 liabilities Debentures 5,555 1,571 5,043 5,018 Bank loans 6,184 1,748 6,524 6,422 Loans from institutions and 549 155 546 540 others Dividend payable - - 326 - Employee benefits 258 73 228 *260 Other liabilities 81 23 86 67 Provisions 67 19 71 66 Deferred tax 1,082 306 1,107 1,159 liabilities Total non-current 13,776 3,895 13,931 13,532 liabilities Total liabilities 17,884 5,056 18,828 18,293 Equity Total equity attributable to equity holders of the Company 1,075 304 833 *960 Non-controlling 2,770 783 2,913 *3,376 interests Total equity 3,845 1,087 3,746 4,336 Total liabilities 21,729 6,143 22,574 22,629 and 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) 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 1,435 406 1,528 465 132 511 *1,978 General and operating 2,610 738 3,015 890 252 963 3,995 expenses Other operating (income) expenses, net (30 ) (8 ) 52 (1 ) - 19 (11 ) 5,523 1,562 6,862 1,881 533 2,250 8,329 Operating income 1,631 461 967 517 145 244 1,949 Financing 241 68 287 97 27 107 *355 expenses, net Income after financing expenses, net 1,390 393 680 420 118 137 1,594 Share in losses of equity-accounted 195 55 233 88 25 93 245 investee Income before 1,195 338 447 332 93 44 1,349 income tax Income tax 428 121 279 143 40 75 *556 Net income (loss) for the 767 217 168 189 53 (31 ) 793 period Income (loss) attributable to: Owners of the 116 33 (105 ) 15 4 (55 ) *46 Company Non-controlling 651 184 273 174 49 24 *747 interests Net income (loss) for the 767 217 168 189 53 (31 ) 793 period Earnings per share Net income 3.87 1.09 (3.53 ) 0.50 0.14 (1.84 ) 1.52 (loss), basic Net income 3.83 1.08 (3.55 ) 0.48 0.14 (1.84 ) 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 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 (270 ) (76 ) (309 ) equipment Investment in intangible assets and (50 ) (14 ) (58 ) deferred expenses Proceeds from the sale of property, 53 15 97 plant and equipment Free cash flow 876 248 754 Contact: B Communications Ltd. Idit Cohen – IR Manager Tel: +972-3-924-0000 firstname.lastname@example.org or Investor relations contacts: Mor Dagan - Investor Relations Tel: +972-3-516-7620 email@example.com
B Communications Reports its Financial Results for the Third Quarter of 2013
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