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Internet Gold Reports Strong Third Quarter 2009 Financial Results

November 19, 2009

PETACH TIKVA, Israel, November 19 /PRNewswire-FirstCall/ — Internet Gold
Golden Lines Ltd., (NASDAQ Global Market and TASE: IGLD) today reported its
financial results for the third quarter of 2009.

    Highlights

    - Strong operating cash flow of NIS 62 million
    - NIS 141 million decrease in net outstanding financial debt compared to
      year-end 2008
    - Smile.Media continues to achieve positive cash flow and bottom line
      profitability
    - Share buy-back program completed successfully
    - Company's 75.3%-owned subsidiary, 012 Smile Communications Ltd.,
      continues process of acquiring the controlling stake in Bezeq, Israel's
      largest telecommunications provider. Transaction expected to close as
      planned
    - 012 Smile Communications signed an agreement with a wholly owned
      subsidiary of Ampal-American Israel Corporation to sell its
      telecommunications business.

012 Smile.Communications: Excellent performance delivered while pursuing
its growth strategy

    - Total revenues increased by 4% to NIS 294 million (US $78
      million)
    - Broadband segment revenues increased by 6%
    - International Long Distance (ILD) segment revenues up on
      both a quarter-by-quarter and year-over-year basis
    - Operating income increased by 11% to NIS 37 million (US $10
      million)
    - Net income increased by 19% to NIS 15 million (US $4.0
      million) or NIS 0.59 per share (US $0.16 per share)
    - Total of 134,000 local telephony lines as of the end of the
      quarter
    - Cash flow from operations for the quarter increased by 36%
      to NIS 64 million (US$17 million)

Financial Results for the Third Quarter

Revenues: Revenues for the third quarter of 2009 were NIS 310 million (US
$82.5 million), a 5.4% increase compared with NIS 294 million in the third
quarter of 2008. The revenues were attributable primarily to the results of
012 Smile.Communications together with the minor contribution of Smile Media.

Adjusted EBITDA: Adjusted EBITDA for the third quarter of 2009 was NIS 69
million
(US $18.4 million). This was a 14% decrease compared to NIS 80.4
million
for the third quarter of 2008, which included a NIS 12.8 million
one-time gain arising from the sale of Smile Media’s interest in MSN Israel.
Excluding the income relating to the MSN transaction, adjusted EBITDA for the
third quarter of 2009 increased by 2% compared to the parallel quarter of
2008. For more information regarding the use of non-GAAP financial measures,
please see the notes in this press release.

Financial Expenses, Net: Financial expenses net, for the third quarter of
2009 totaled NIS 36.5 million (US $9.7 million) compared with NIS 47.5
million
in the third quarter of 2008. Financial expenses, net, for the third
quarter of 2009 included: (1) NIS 5.9 million (US $1.6 million) associated
with the period’s decrease of the shekel-dollar exchange rate; (2) NIS 35.5
million (US $9.4 million) associated with the Company’s bonds, reflecting the
period’s 2.4% increase in the Israeli CPI; and (3) financial income of NIS
5.4 million
(US $1.4 million) associated with the mark-to-market of certain
marketable securities whose values have increased as a result of the global
improvement in the capital markets.

Net Income: On a U.S. GAAP basis, net income for the third quarter of
2009 was NIS 2.8 million (US $0.7 million), or NIS 0.16 (US $0.04) per share
on a fully diluted basis. This compares to a net loss of NIS 8.5 million, or
NIS 0.4 loss per share on a fully diluted basis for the third quarter of 2008.

Capital Resources

The Company’s cash, cash equivalents and marketable securities as of
September 30, 2009 were NIS 676 million (US $180 million). Total assets as of
September 30, 2009 were approximately NIS 2.0 billion (U.S. $535 million) and
total bank debt was NIS 56 million (U.S. $15 million). Shareholders’ equity
as of September, 30 2009 was NIS 422 million ($112 million), representing 21%
of total assets.

Comments of Management

Commenting on the results, Eli Holtzman, Internet Gold’s CEO, said, “We
are pleased to report another strong quarter, demonstrating the success of
our telecommunications brands in a marketplace that continues to grow and
strengthen. With great results, 012 Smile.Communications continues to
generate significant cash flow, enabling us to continue decreasing our
financial debt and to fund the next phase of our growth.”

Mr. Holtzman continued, “We are very excited about the rapid progress
being made towards 012 Smile’s acquisition of a controlling stake in Bezeq
The Israel Telecommunication Corp., Israel’s largest telecommunications
provider (TASE: BZEQ). Earlier this week we announced that 012
Smile.Communications signed an agreement with a wholly owned subsidiary of
Ampal-American Israel Corporation (Nasdaq: AMPL) to sell its ongoing
telecommunications business for NIS 1.2 billion, or approximately $318
million
. With this agreement in place, we believe 012 Smile is on track to
close the Bezeq transaction prior to April 25, 2010.”

“Following the closing of the Bezeq transaction,” concluded Mr. Holtzman,
“Internet Gold will become the undisputed leader of Israel’s
telecommunications industry, a goal towards which we have been moving
steadily for nearly two decades and which we believe will lead to
significantly increased shareholder value.”

Business Segments

012 Smile.Communications Ltd. (NASDAQ and TASE: SMLC):

012 Smile.Communications reported improved quarterly revenues of NIS 294
million
(US $78 million) for the quarter ended September 30, 2009, compared
to NIS 282 million for the same period in 2008, a 4% increase. Revenue from
broadband services increased to NIS 148 million (US $39 million) for the
third quarter of 2009 compared to NIS 140 million for the third quarter of
2008, an increase of 6%. Revenue from traditional voice services for the
quarter was NIS 146 million (US $38.9 million) compared to NIS 142 million
for the same period last year.

Operating income for the third quarter of 2009 increased to NIS 37.3
million
(US $ 10 million) compared with NIS 33.8 million for the same period
last year.

Adjusted EBITDA for the third quarter of 2009 increased to a record NIS
69.7 million
(US $18.5 million) compared with NIS 62.6 million for the same
period last year.

Smile.Media Ltd.: Smile.Media delivered another consecutive quarter of
operating and net income. The segment’s revenues for the third quarter were
NIS 16.4 million (US $4.4 million), derived primarily from its e-commerce
businesses. The subsidiary’s operating income for the third quarter of 2009
reached NIS 0.4 million (US $0.1 million) compared with NIS 9.6 million for
the same period last year, which result included NIS 12.8 million of income
from the sale of its interest in MSN Israel.

Other: During the third quarter of 2009, Internet Gold incurred operating
expenses of approximately NIS 1.3 million (US $0.35 million). These expenses
were primarily for activities related to the Company’s listing on public
securities exchanges, including expenses such as investor relations, Sarbanes
Oxley compliance, insurance and legal expenses and for the continued
investigation of potential joint ventures and M&A opportunities.

Buyback Programs

Share Repurchase Program: The Company repurchased 111,191 of its ordinary
shares during the quarter ended September 30, 2009. The total number of
Internet Gold shares repurchased through the Company’s share repurchase
programs as of September 30, 2009 reached 5,477,859 shares, bringing the
total number of outstanding shares as of September 30, 2009 to 18,040,547
shares. This represents the successful completion of the buyback program
approved by the Company’s Board of Directors.

    - Bond Repurchase Program: The Company did not repurchase any of its
      bonds during the quarter or to date. As of September 30, 2009, NIS
      78,724,338 par value of Series A bonds and NIS 417,285,630 par value of
      Series B bonds, remain outstanding.

Notes:

Non-GAAP Measurements Reconciliation between the Company’s results on a
GAAP and non-GAAP basis is provided in a table immediately following the
Consolidated Statement of Operations (Non-GAAP Basis). Non-GAAP financial
measures consist of GAAP 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 our performance exclusive of non-cash charges and other items that are
considered by management to be outside of our core operating results. Our
non-GAAP financial measures are not meant to be considered in isolation or as
a substitute for comparable GAAP measures, and should be read only in
conjunction with our consolidated financial statements prepared in accordance
with GAAP.

Our management regularly uses our supplemental non-GAAP financial
measures internally to understand, manage and evaluate our business and make
operating decisions. These non-GAAP measures are among the primary factors
management uses in planning for and forecasting future periods. We believe
these non-GAAP financial measures provide consistent and comparable measures
to help investors understand our current and future operating cash flow
performance. These non-GAAP financial measures may differ materially from the
non-GAAP financial measures used by other companies. Reconciliation between
results on a GAAP and non-GAAP basis is provided in a table immediately
following the Consolidated Statement of Operations.

EBITDA is a non-GAAP financial measure generally defined as earnings
before interest, taxes, depreciation and amortization. We define adjusted
EBITDA as net income before financial income (expenses), net impairment and
other charges, income attributable to non-controlling interest, expenses
recorded for stock compensation in accordance with SFAS 123(R), income tax
expenses and depreciation and amortization. We present adjusted 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 (most particularly affecting our interest expense given our
recently incurred significant debt), 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). Adjusted 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 GAAP as a measure of our profitability
or liquidity. Adjusted 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, adjusted 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.

Convenience Translation to Dollars For the convenience of the reader, the
reported NIS figures of September 30, 2009 have been presented in thousands
of U.S. dollars, translated at the representative rate of exchange as of
September 30, 2009 (NIS 3.758 = 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.

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 in the industries it is engaged, the
failure to manage growth and other risks detailed from time to time in
Internet Gold’s filings with the Securities Exchange Commission, including
Internet Gold’s Annual Report on Form 20-F. 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.

About Internet Gold – Golden Lines Ltd.

Internet Gold – Golden Lines Ltd. is one of Israel’s leading
communications groups with a major presence across all Internet-related
sectors. Its subsidiary, 012 Smile.Communications Ltd., is one of Israel’s
major Internet and international telephony service providers, and one of the
largest providers of enterprise/IT integration services. Its 100% owned
subsidiary, Smile.Media Ltd., manages a portfolio of Internet portals and
e-Commerce sites.

    Consolidated Balance Sheets (in thousands)

                                                                  Convenience
                                                                  translation
                                                                    into U.S.
                                                                      dollars
                                                                     $1 = NIS
                                                                        3.758
                                     September 30  December 31   September 30
                                             2009         2008           2009
                                       (Unaudited)   (Audited)    (Unaudited)
                                            NIS thousands         $ thousands
    Current assets
    Cash and cash equivalents              92,237       86,090         24,544
    Marketable securities                 583,747      214,895        155,335
    Trade receivables, net                202,072      217,796         53,771
    Related parties receivable              3,064        1,729            815
    Prepaid expenses and other
    current assets                         23,910       27,046          6,363
    Deferred tax assets                       113       26,116             30

    Total current assets                  905,143      573,672        240,858

    Investments
    Long-term trade receivables             6,260        6,350          1,666
    Marketable securities                       -      279,823              -
    Assets held for employee
    severance benefits                     21,949       17,786          5,841
    Deferred tax assets                        42           57             11
    Property and equipment, net           178,501      171,104         47,499
    Other assets, net                     326,475      302,934         86,875
    Other intangible assets,              157,138      174,640         41,814
    Goodwill                              416,888      416,888        110,933

    Total assets                        2,012,396    1,943,254        535,497

    Consolidated Balance Sheets (cont'd)

                                                                  Convenience
                                                                  translation
                                                                    into U.S.
                                                                      dollars
                                                                     $1 = NIS
                                                                        3.758
                                     September 30  December 31   September 30
                                             2009         2008           2009
                                       (Unaudited)   (Audited)    (Unaudited)
                                              NIS thousands       $ thousands
    Current liabilities
    Short-term bank credit                 52,910       42,738         14,079
    Current maturities of
    long-term obligations                   4,203       11,238          1,118
    Accounts payable                      140,256      148,580         37,322
    Current maturities of convertible
    Debentures                             16,442       17,516          4,375
    Current maturities of debentures       87,969      100,142         23,409
    Other payable and accrued
    expenses                              127,680      125,388         33,976
    Related parties payable                 3,145        3,223            837
    Total current liabilities             432,605      448,825        115,116

    Long term liabilities
    Long-term obligations and
    other payables                              -          760              -
    Convertible debentures                 73,692       84,857         19,609
    Debentures                            786,782      812,254        209,362
    Deferred tax liabilities               48,256       46,856         12,841
    Liability for employee
    severance benefits                     38,311       34,626         10,195
    Total long term liabilities           947,041      979,353        252,007

    Total liabilities                   1,379,646    1,428,178        367,123

    Shareholders' equity                  421,729      324,604        112,222
    Non-controlling interest              211,021      190,472         56,152

    Total equity                          632,750      515,076        168,374

    Total liabilities and
    shareholders' equity                2,012,396    1,943,254        535,497

                                            Internet Gold - Golden Lines Ltd.

    Consolidated Statements of Operations

                                                                  Convenience
                                                                  translation
                                                                 into dollars
                                                                     $1 = NIS
                                                                        3.758
                                Three months       Nine months     Nine-month
                                period ended      period ended   period ended
                                September 30      September 30   September 30
                               2009     2008       2009      2008        2009
                      (Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
                             NIS thousands       NIS thousands    $ thousands
    Revenue                 309,816  293,846    920,091   854,901     244,835

    Cost and operating
    expenses
    Cost of revenue         218,459  204,620    639,356   583,182     170,132
    Selling and
    marketing                38,446   43,446    116,576   125,996      31,020
    General and
    administrative           16,580   16,800     47,809    53,644      12,722
    Impairment and
    other                         -        -          -     6,922           -
    expenses, net
    Other income                  -  (12,791)         -   (12,791)          -

    Total operating         273,485  252,075    803,741   756,953      13,874
    expenses

    Operating income         36,331   41,771    116,350    97,948      30,961
    Financial expenses,
    net                      36,522   47,533      4,821   102,604       1,283

    Income (loss) before       (191)  (5,762)   111,529    (4,656)     29,678
    income taxes
    Income tax expenses      (6,699)    (815)    29,011     4,707       7,720
    (income)

    Income (loss) after
    income
    tax expenses              6,508   (4,947)    82,518    (9,363)     21,958
    Net income attributable
    to non-
    controlling interest      3,671    3,506     23,631     6,553       6,288

    Net income (loss)         2,837   (8,453)    58,887   (15,916)     15,670

    Basic earnings (loss)
    per share
    Basic earnings (loss)      0.16    (0.40)      3.19     (0.72)       0.85
    per share

    Weighted average number
    of ordinary shares used
    in calculation of
    basic earnings per
    share                    18,077   21,191     18,453    21,986      18,453

    Diluted earnings (loss)
    per share
    Diluted earnings (loss)
    per share                  0.16    (0.40)      3.19     (0.72)       0.85

    Weighted average number
    of shares used in
    calculation of diluted
    earnings per share       18,077   21,191     18,453    21,986      18,453
    share

    Reconciliation Table of Non-GAAP Measures (NIS in thousands)

                                                                  Convenience
                                                                  translation
                                                                 into dollars
                                                                     $1 = NIS
                                                                        3.758
                                Three months       Nine months     Nine-month
                                period ended      period ended   period ended
                                September 30      September 30   September 30
                               2009     2008       2009      2008        2009
                      (Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
                             NIS thousands       NIS thousands    $ thousands
    GAAP operating income    36,331   41,771    116,350     97,948     30,961

    Adjustments
    Amortization of acquired
    intangible assets         5,720    6,820     17,160     20,460      4,566
    Impairment and other
    expenses, net                 -        -          -      6,922          -
    Other income                  -  (12,791)         -    (12,791)         -
    Other income in respect
    of MSN transaction            -   12,791          -     12,791          -
    Stock compensation in
    accordance with SFAS
    123(R)                    1,239    1,239      3,717      2,189        989

    Non-GAAP adjusted
    operating income         43,290   49,830    137,227    127,519     36,516

    GAAP tax expenses, net   (6,699)    (815)    29,011      4,707      7,720

    Adjustments

    Amortization of acquired
    intangible assets
    Included in tax
    expenses, net             8,787    1,841     11,761      5,523      3,129

    Non-GAAP tax expenses,
    net                       2,088    1,026     40,772     10,230     10,849

    Net income (loss) as
    Reported                  2,837   (8,453)    58,887    (15,916)    15,670

    Non-controlling interest
    in operations of
    consolidated
    subsidiaries              3,671    3,506     23,631      6,553      6,288
    Income tax expenses
    (income)                 (6,699)    (815)    29,011      4,707      7,720
    Impairment and other
    expenses, net                 -        -          -      6,922          -
    Other income                  -  (12,791)         -    (12,791)         -
    Other income in respect
    of MSN transaction            -   12,791          -     12,791          -
    Stock compensation in
    accordance with SFAS
    123(R)                    1,239    1,239      3,717      2,189        989
    Financial expenses, net  36,522   47,533      4,821    102,604      1,283
    Depreciation and
    Amortization             31,528   37,404     88,215     94,398     23,474

    Adjusted EBITDA          69,098   80,414    208,282    201,457     55,424

    start_table>
    For further information, please contact: Ms. Idit Azulay, Internet Gold
idita@co.smile.net.il / Tel: +972-72-200-3848
Internet Gold - Golden Lines Ltd
SOURCE  Internet Gold - Golden Lines Ltd

Source: newswire