- Second Dividend during 2015 is expected
from B Communications on September 29, 2015 -
Internet Gold – Golden Lines Ltd. (NASDAQ Global Select Market
and TASE:IGLD) today reported its financial results for the quarter
ended June 30, 2015. Internet Gold’s primary holding is its
controlling interest in B Communications Ltd. (TASE and Nasdaq:
BCOM), which in turn holds the controlling interest in Bezeq, The
Israel Telecommunication Corp., Israel’s largest telecommunications
provider (TASE:BEZQ).
Commenting on the results, Doron Turgeman, CEO of Internet Gold
said, “During the last few years, we focused on improving our debt
structure and our financial strength. We feel very comfortable with
both our current Loan to Value and liquidity. Today's decision by B
Communications' board of directors to declare a cash dividend in
the amount of NIS 0.73 per share, is very good news for us and we
expect to receive NIS 15 million on September 29, 2015. It's the
second consecutive quarter that BCOM distributed a dividend to its
shareholders and we believe there will be more distributions in the
quarters ahead. We are very pleased with the results of our B
Communications subsidiary and with Bezeq, which continues to
generate a steady return that enhances our overall financial
position and capabilities.”
Dividend from B Communications: On August 31, 2015, B
Communications' board of directors declared a cash dividend in the
amount of NIS 22 million ($6 million) or NIS 0.73 ($0.19) per
share. Internet Gold expects to receive its distributive share of
approximately NIS 15 million ($4 million) on September 29, 2015. On
June 16, 2015, Internet Gold received a cash dividend totaling NIS
45 million ($12 million) from B Communications as part of the NIS
67 million ($18 million) or NIS 2.24 ($0.59) per share dividend
paid by BCOM.
Bezeq’s Results: For the second quarter of 2015, the
Bezeq Group reported revenues of NIS 2.6 billion ($691 million) and
an operating profit of NIS 794 million ($211 million). Bezeq’s
EBITDA for the second quarter totaled NIS 1.25 billion ($330
million), representing an EBITDA margin of 47.8%. Net profit for
the period attributable to Bezeq’s shareholders totaled NIS 482
million ($128 million). Bezeq's cash flow from operating activities
during the period totaled NIS 840 million ($223 million). The
second quarter of 2015 was the first quarter for Bezeq to fully
consolidate the operating results of YES in its financials.
Cash and Debt Position: As of June 30, 2015, Internet
Gold’s unconsolidated cash and cash equivalents and short term
investments totaled NIS 335 million ($89 million), its
unconsolidated gross debt was NIS 1.1 billion ($303 million) and
its unconsolidated net debt was NIS 807 million ($214 million).
Internet Gold's Unconsolidated Balance
Sheet Data (1)
In millions Convenience
translation into
U.S. dollars (Note A) June 30, June 30,
June 30, December 31, 2014 2015
2015 2014 NIS NIS US$ NIS
Short term liabilities 72
215 57 82 Long term
liabilities 1,125
927 246 1,062 Total liabilities
1,197
1,142 303 1,144 Cash and cash equivalents 418
335 89 322 Total net debt 779
807 214
822
(1) Does not include the consolidated
balance sheet of B Communications and its subsidiaries.
Internet Gold's Cash Management: Internet Gold manages
its cash balances according to an investment policy that was
approved by its board of directors. The investment policy seeks to
preserve principal and maintain adequate liquidity while maximizing
the income received from investments without significantly
increasing the risk of loss. According to Internet Gold's
investment policy approximately 80% of its funds must be invested
in investment-grade securities.
Dividend from Bezeq: On March 25, 2015, the Board of
Directors of Bezeq resolved to recommend to the general meeting of
its shareholders the distribution of a cash dividend of NIS 844
million ($224 million). On May 6, 2015, Bezeq's shareholders
approved the dividend distribution and on May 27, 2015, B
Communications’ received its share of the dividend distribution of
NIS 259 million ($69 million).
On August 30, 2015, the Board of Directors of Bezeq resolved to
recommend to the general meeting of shareholders the distribution
of a cash dividend of NIS 933 million ($248 million) representing
its profits for the first half of 2015, excluding its revaluation
gain of NIS 12 million ($3 million) arising from its gaining
control over YES. The dividend, which is subject to shareholder
approval, is expected to be paid on October 26, 2015 to
shareholders of record as of October 12, 2015.
B Communications’ share of the dividend distribution, if
approved, is expected to be approximately NIS 286 million ($76
million).
Internet Gold’s Second Quarter Consolidated Financial
Results
Internet Gold's consolidated revenues for the second quarter of
2015 totaled NIS 2.6 billion ($691 million), a 15.7% increase
compared with NIS 2.25 billion reported in the second quarter of
2014. The increase resulted from the full consolidation of Yes,
beginning in the second quarter of 2015. For both the current and
the prior-year periods, Internet Gold’s consolidated revenues
consisted entirely of Bezeq’s revenues.
Internet Gold's consolidated operating income for the second
quarter of 2015 totaled NIS 611 million ($162 million), a 41%
decrease compared with NIS 1,039 million reported in the second
quarter of 2014. Bezeq’s results for the second quarter of 2014
included NIS 582 million one-time capital gain (before tax) from
the sale of Coral Tel Ltd., the operator of the "Yad2" portal.
Internet Gold's consolidated net income for the second quarter
of 2015 totaled NIS 239 million ($63 million), compared with NIS
532 million reported in the second quarter of 2014. Bezeq’s results
for the second quarter of 2014 included a one-time capital gain
(after tax) of NIS 437 million from the sale of Coral Tel Ltd.
Internet Gold’s Second Quarter Unconsolidated Financial
Results
As of June 30, 2015 Internet Gold held approximately 67% of B
Communications outstanding shares. Accordingly, Internet Gold's
interest in B Communications’ net income for the second quarter of
2015 totaled NIS 14 million ($4 million), compared with its share
in B Communications' net income of NIS 72 million in the second
quarter of 2014.
Internet Gold’s unconsolidated net financial expenses for the
second quarter of 2015 totaled NIS 26 million ($7 million) compared
with NIS 39 million in the second quarter of 2014. These expenses
consist of NIS 22 million ($6 million) of interest and CPI linkage
expenses related to its publicly-traded debentures and NIS 4
million ($1 million) of financial expenses generated by the decline
in value of our short term investments.
Internet Gold's net loss attributable to shareholders for the
second quarter of 2015 totaled NIS 13 million ($3 million) compared
with an income attributable to its shareholders of NIS 32 million
in the second quarter of 2014.
In millions
Convenience translation Three-month
Three-month into period ended period
ended U.S. dollars Year ended June 30,
June 30, (Note A) December 31, 2014
2015 2015 2014 NIS
NIS
US$ NIS Revenues
- - - - Financial
expenses, net (39)
(26) (7) (83) Operating
expenses (1)
(1) - (4) Interest in BCOM's net
income (loss) 72
14 4 (16) Net income (loss)
32
(13)
(3)
(103)
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,
2015. For a full discussion of Bezeq’s results for the second
quarter ended June 30, 2015, please refer to its website:
http://ir.bezeq.co.il.
Bezeq Group (consolidated) Q2 2015
Q2 2014 % change (NIS millions)
Revenues 2,603 2,250 15.7% Operating profit 794 1,234 -35.7% EBITDA
1,245 1,553 -19.8% EBITDA margin 47.8% 69.0% Net profit 482 810
-40.5% Basic and Diluted EPS (NIS) 0.17 0.29 -41.4% Cash flow from
operating activities 840 1,064 -21.1% Payments for investments 511
323 58.2% Free cash flow 1 413 787 -47.5% Net debt/EBITDA (end of
period) 2 2.30 1.54 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 2015
amounted to NIS 2.60 billion ($691 million) compared with NIS 2.25
billion in the corresponding quarter of 2014, an increase of 15.7%.
The increase was related to the first-time consolidation of YES
revenues in the second quarter of 2015 in the amount of NIS 439
million ($116 million) as well as an increase in the revenues of
Bezeq Fixed-Line and Bezeq International. The increase was
partially offset by lower revenues at Pelephone.
Salary expenses of the Bezeq Group in the second quarter of 2015
amounted to NIS 497 million ($132 million) compared with NIS 443
million in the corresponding quarter of 2014, an increase of 12.2%.
The increase was due to the first-time consolidation of YES salary
expenses in the second quarter of 2015 in the amount of NIS 62
million ($16 million). The increase was partially offset by a
decrease in salary expenses of Pelephone due to continued
streamlining actions.
Operating expenses of the Bezeq Group in the second quarter of
2015 amounted to NIS 1.00 billion ($266 million) compared with NIS
822 million in the corresponding quarter of 2014, an increase of
21.9%. The increase was due to the first-time consolidation of YES
operating expenses in the second quarter of 2015 in the amount of
NIS 227 million ($60 million). The increase was partially offset by
a decrease in operating expenses at Pelephone and Bezeq Fixed-Line
due to continued streamlining actions.
Other operating income of the Bezeq Group in the second quarter
of 2015 amounted to NIS 141 million ($37 million) compared with NIS
568 million in the corresponding quarter of 2014. Other operating
income in the corresponding quarter in 2014 was influenced by a
one-time NIS 582 million ($154 million) gain from the sale of Coral
Tel Ltd.. The decrease in other operating income was partially
offset by provision in the amount of NIS 117 million for early
retirement of employees at Bezeq Fixed-Line in the second quarter
of 2014.
Operating profit of the Bezeq Group in the second quarter of
2015 amounted to NIS 794 million ($211 million) compared with NIS
1.23 billion in the corresponding quarter of 2014, a decrease of
35.7%. Earnings before interest, taxes, depreciation and
amortization (EBITDA) of the Bezeq Group in the second quarter of
2015 amounted to NIS 1.25 billion ($330 million) (EBITDA margin of
47.8%) compared with NIS 1.55 billion (EBITDA margin of 69.0%) in
the corresponding quarter of 2014, a decrease of 19.8%.
Net profit of the Bezeq Group in the second quarter of 2015
amounted to NIS 482 million ($128 million) compared with NIS 810
million in the corresponding quarter of 2014, a decrease of
40.5%.
The decrease in the profitability metrics of the Bezeq Group was
due to the aforementioned one-time NIS 582 million ($154 million)
gain from the sale of Coral Tel Ltd., which was partially offset by
provision in the amount of NIS 117 million for early retirement of
employees at Bezeq Fixed-Line in the second quarter of 2014.
Cash flow from operating activities of the Bezeq Group in the
second quarter of 2015 amounted to NIS 840 million ($223 million)
compared with NIS 1.06 billion in the corresponding quarter of
2014, a decrease of 21.1%. The decrease in cash flow from operating
activities was primarily due to lower profitability at Pelephone
and changes in working capital at Pelephone and Bezeq Fixed-Line.
The decrease was partially offset by the first-time consolidation
of Yes, which had cash flow from operating activities of NIS 106
million ($28 million) in the first quarter of 2015.
Payments for investments (Capex) of the Bezeq Group in the
second quarter of 2015 amounted to NIS 511 million ($136 million)
compared with NIS 323 million in the corresponding quarter of 2014,
an increase of 58.2%. The increase in investments was primarily due
to the payment of NIS 96 million($25 million) by Pelephone for the
LTE 4G frequencies in a government tender as well as the first-time
consolidation of the investments of Yes in the second quarter of
2015 in the amount of NIS 82 million ($22 million).
Free cash flow of the Bezeq Group in the second quarter of 2015
amounted to NIS 413 million ($110 million) compared with NIS 787
million in the corresponding quarter of 2014, a decrease of
47.5%.
Net financial debt of the Bezeq Group amounted to NIS 9.54
billion ($2.53 billion) at June 30, 2015 compared with NIS 6.95
billion as of June 30, 2014. At June 30, 2015, the Bezeq Group net
financial debt to EBITDA ratio was 2.30, compared with 1.54 on June
30, 2014.
Notes:
A. Convenience Translation to Dollars: For the
convenience of the reader, certain of the reported NIS figures of
June 30, 2015 have been presented in millions of U.S. dollars,
translated at the representative rate of exchange as of June 30,
2015 (NIS 3.769 = U.S. r $1.00). The U.S. dollar ($) 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.
B. Use of non-IFRS Measurements: We and the Bezeq Group’s
management regularly use supplemental non-IFRS financial measures
internally to understand, manage and evaluate its business and make
operating decisions. We believe these non-IFRS financial measures
provide consistent and comparable measures to help investors
understand the Bezeq Group’s current and future operating cash flow
performance.
These non-IFRS financial measures may differ materially from the
non-IFRS financial measures used by other companies.
EBITDA is a non-IFRS financial measure generally defined as
earnings before interest, taxes, depreciation and amortization. The
Bezeq Group defines EBITDA as net income before financial income
(expenses), net, impairment and other charges, expenses recorded
for stock compensation in accordance with IFRS 2, income tax
expenses and depreciation and amortization. We present the Bezeq
Group’s EBITDA as a supplemental performance measure because we
believe that it facilitates operating performance comparisons from
period to period and company to company by backing out potential
differences caused by variations in capital structure, tax
positions (such as the impact of changes in effective tax rates or
net operating losses) and the age of, and depreciation expenses
associated with, fixed assets (affecting relative depreciation
expense).
EBITDA should not be considered in isolation or as a substitute
for net income or other statement of operations or cash flow data
prepared in accordance with IFRS as a measure of profitability or
liquidity. EBITDA does not take into account our debt service
requirements and other commitments, including capital expenditures,
and, accordingly, is not necessarily indicative of amounts that may
be available for discretionary uses. In addition, EBITDA, as
presented in this press release, may not be comparable to similarly
titled measures reported by other companies due to differences in
the way that these measures are calculated.
Reconciliation between the Bezeq Group’s results on an IFRS and
non-IFRS basis is provided in a table immediately following the
Company's consolidated results. Non-IFRS financial measures consist
of IFRS financial measures adjusted to exclude amortization of
acquired intangible assets, as well as certain business combination
accounting entries. The purpose of such adjustments is to give an
indication of the Bezeq Group’s performance exclusive of non-cash
charges and other items that are considered by management to be
outside of its core operating results. The Bezeq Group’s non-IFRS
financial measures are not meant to be considered in isolation or
as a substitute for comparable IFRS measures, and should be read
only in conjunction with its consolidated financial statements
prepared in accordance with IFRS.
About Internet Gold
Internet Gold is a telecommunications-oriented holding company
which is a controlled subsidiary of Eurocom Communications Ltd.
Internet Gold’s primary holding is its controlling interest in B
Communications Ltd. (TASE and Nasdaq: BCOM), which in turn holds
the controlling interest in Bezeq, The Israel Telecommunication
Corp., Israel’s largest telecommunications provider (TASE: 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) June 30, June 30, June
30, December 31, 2015 2015 2014
2014 NIS US$ NIS NIS
Assets Cash and cash equivalents
904 240 796
732 Restricted cash
29 8 73 65 Investments, including
derivatives
2,192 582 2,645 3,406 Trade receivables,
net
2,256 598 2,335 2,227 Other receivables
220 58 329 242 Inventory
96 26 89 96
Assets classified as held-for-sale
24 6 135 52
Total current assets 5,721 1,518 6,401 6,820
Investments, including derivatives
177 47 80
271 Long-term trade and other receivables
656 173 587
566 Property, plant and equipment
7,345 1,949 6,542
6,572 Intangible assets
7,642 2,028 6,175 5,908
Deferred and other expenses
360 95 370 364
Broadcasting rights
471 125 - - Investment in
equity-accounted investee
28 8 1,014 1,057 Deferred
tax assets
855 227 35 -
Total non-current
assets 17,534 4,652 14,803 14,738
Total
assets 23,255 6,170 21,204 21,558
Internet Gold – Golden Lines 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, 2015
2015 2014 2014 NIS US$
NIS NIS Liabilities Bank loans and credit and
debentures
2,301 610 1,605 1,561 Trade payables
1,021 271 639 664 Liability to related party
101 27 - - Other payables including derivatives
818 217 701 757 Current tax liabilities
777
206 727 671 Provisions
90 24 134 62 Employee
benefits
272 72 378 259
Total current
liabilities 5,380 1,427 4,184 3,974 Bank
loans and debentures
13,817 3,666 12,338 13,419
Employee benefits
238 63 229 233 Other liabilities
208 55 304 262 Provisions
69 18 68 69
Deferred tax liabilities
805 214 899 835
Total
non-current liabilities 15,137 4,016 13,838
14,818
Total liabilities 20,517 5,443
18,022 18,792
Equity Total equity attributable to
equity holders of the Company
(159) (42) (187) (183)
Non-controlling interests
2,897 769 3,369 2,949
Total equity 2,738 727 3,182 2,766
Total liabilities and equity 23,255
6,170 21,204 21,558
Internet Gold – Golden Lines Ltd.
Condensed Consolidated Statements of
Income as at
(In million 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. dollars U.S. dollars
(Note A) (Note A) 2015 2015 2014
2015 2015 2014 2014 NIS
US$ NIS NIS US$ NIS NIS
Revenues 4,777 1,267 4,561
2,603
690 2,250 9,055
Cost and expenses Depreciation
and amortization
1,011 268 941
572 152
472 1,873 Salaries
938 249 891
498 132
443 1,771 General and operating expenses
1,805 479
1,695
1,004 266 824 3,371 Other operating income, net
(93) (25) (536)
(82) (22) (528) (535)
3,661 971 2,991
1,992 528 1,211
6,480
Operating income 1,116 296 1,570
611 162 1,039 2,575 Financing expenses, net
335 89 515
235 62 165 694
Income after financing expenses, net 781
207 1,055
376 100 874 1,881 Share of
losses in equity-accounted investee
16 4 98
-
- 79 170
Income before income tax 797
211 957
376 100 795 1,711 Income tax
256 68 394
137 36 263 667
Net
income for the period 541 143 563
239
64 532 1,044
Income (loss) attributable to:
Owners of the company
15 4 (112)
(13)
(3) 32 (103) Non-controlling interests
526 139
675
252 67 500 1,147
Net income for the
period 541 143 563
239 64 532 1,044
Earnings per share Net income (loss),
basic 0.82 0.22 (5.82)
(0.63)
(0.17) 1.68 (5.38)
Net income (loss), diluted
0.77 0.21 (5.89)
(0.65) (0.17) 1.63
(5.50)
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
June 30, Convenience translation
into U.S. dollars (Note A) 2015
2015 2014 NIS US$ NIS
Operating income
794 210 1,234 Depreciation and
amortization
451 120 319 EBITDA
1,245
330 1,553
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) 2015 2015
2014 NIS US$ NIS Cash flow from
operating activities
840 223 1,064 Purchase of
property, plant and equipment
(363) (96) (281)
Investment in intangible assets and deferred expenses
(148)
(39) (42) Proceeds from the sale of property, plant and
equipment
84 22 46 Free cash flow
413
110 787
Designated disclosure
with respect to the Company's projected cash flows
In accordance with the "hybrid model disclosure requirements"
promulgated by the Israeli Securities Authority that are applicable
to Internet Gold - Golden Lines Ltd. (the "Company"), the following
is a report of the Company’s projected cash flows (the "report")
and a disclosure of the examination by the Company’s board of
directors of the Company’s liquidity in accordance with regulations
10(b)(1)(d) and 10(b)(14) of the Securities Regulations (Immediate
and Periodic Notices) 5730-1970:
- The Company’s un-reviewed financial
statements as of June 30, 2015, and for the quarter then ended,
reflect that the Company had an equity deficit of NIS 159 million
as of such date.
- The Company’s board of directors
reviewed the Company’s outstanding debt obligations, its existing
and anticipated cash resources and needs that were included in the
framework of the projected cash flow report for the periods from
July 1, 2015 until December 31, 2015, January 1, 2016 until
December 31, 2016 and January 1, 2017 until June 30, 2017,
described below. The board of directors also examined the
assumptions and projections that were included in the report and
determined that such assumptions and projections are reasonable and
appropriate.
- Based on the foregoing, the Company’s
board of directors determined that the Company does not have a
liquidity problem and that for the duration of the period covered
by the projected cash flows statement there is no reasonable doubt
that the Company will not meet its existing and anticipated
liabilities when due.
The following is the projected cash
flow of the Company and the assumptions upon which it is
based:
For the period from July 1, 2015 until December 31,
2015 For the period from January 1, 2016 until
December 31, 2016 For the period from January 1, 2017
until June 30, 2017 NIS millions NIS millions
NIS millions Opening balance: Cash
and cash equivalents (1) 39 10 10
Independent sources: Cash flows from
investing activities: Proceeds from the sale of marketable
securities (2)(3) 35 91 114
Cash provided by investing
activities 35 91 114
Sources from Subsidiary: Dividends from
subsidiary (4) 31 98 47
Projected uses: Cash flows used in operating
activities (5) (2) (4) (2)
Cash flows from financing activities: Repayments of
debentures (6) (62) (132) (134) Interest payments (6) (31) (53)
(25)
Cash used in financing activities (93)
(185) (159) Closing
balance: Cash and cash equivalents (1)
10 10 10
Assumptions and explanations pertaining to
the above table:
(1) Cash flows include the Company’s projected cash flows and do
not include the consolidation of projected cash flows from the
Company’s subsidiary, B Communications Ltd. (“B Communications”) or
from Bezeq - The Israel Telecommunications Corp. Ltd.
(“Bezeq”).
(2) In addition to the cash balances it maintains, the Company
also invests in low-risk, high liquidity marketable securities that
are used to finance its operations. The Company’s investment policy
was reviewed by the Company’s audit committee and by a credit
rating agency. At least 80% of the Company's portfolio is invested
in securities rated at a local rating of AA- and higher. As of July
1, 2015, the Company’s investments in marketable securities totaled
NIS 296 million and by June 30, 2017 this balance is expected to be
NIS 69 million.
As of June 30, 2015, cash, cash equivalents and current
investments in marketable securities totaled NIS 335 million. These
liquid balances can be converted to cash in a short period of time
and are a source for debt service. The Company’s cash, cash
equivalents and current investments in marketable securities are
sufficient for the service of the Company's debt through February
2017.
(3) For the purposes of calculating cash flows from investments
in marketable securities, the Company assumed an annual yield of 3%
on the average balance of its investments in marketable securities
during the period. This assumption is based on the Company's
conservative investment policy, as well as on yields historically
achieved by the Company from its investments in marketable
securities and on management’s assessment of the probability of
achieving such yield during the period.
The following are the benchmarks used by the Company and a
sensitivity analysis of the above assessments:
A. In 2014 and in 2013 the Company generated yields of 2.4% and
5.5%, respectively, on its cash and marketable securities
portfolio. The Company does not anticipate that there will be any
material changes to its investment policy in the projected
periods.
B. The following table shows the expected profit in NIS millions
from investments in cash and marketable securities in the projected
periods under a scenario of a 5% annual yield and a scenario of a
-2% annual yield:
Period Annual yield
5% -2% 1 – six month profit (loss) 7 (3) 2 – annual
profit (loss) 11 (4) 3 – six month profit (loss) 3 (1)
(4) Assumption of the receipt of dividends from B Communications
during the period is based on the following:
According to what it believes to be a conservative estimate, the
Company’s management anticipates that B Communications will
distribute accumulated dividends of at least NIS 265 million by
June 30, 2017. This assumption is based on market forecasts of the
estimated net profits of Bezeq and on the Company's estimation of B
Communications’ anticipated retained earnings during the projected
periods. These estimates are derived, among other things, from B
Communications' projected financing expenses and its projected
purchase price allocation amortization expenses with respect to its
acquisition of the controlling interest in Bezeq ("Bezeq PPA") that
are non-cash expenses. Future Bezeq PPA amortization expenses are
expected to decrease significantly because of the accelerated
depreciation method that was adopted by B Communications at the
time of its acquisition of the controlling interest in Bezeq. From
April 14, 2010, the date of B Communications' acquisition of its
interest in Bezeq, until June 30, 2015, B Communications has
amortized approximately 69% of the total Bezeq PPA.
The dividend assumption stated in the distribution estimate
above, does not differ materially from that reported in the
previous quarter. The Company's management made only an internal
update of the timing of distributions between the projected
periods.
B Communications does not have a dividend distribution policy.
Nevertheless, the Company assumes that there is a high probability
that B Communications will distribute most of its retained earnings
balance as a dividend, based, among other things, on B
Communications’ (i) dividend distributions in December 2013 and
June 2015, and (ii) declaration in August 2015 of a dividend
payable in September 2015. The Company believes that the
probability of future dividend distributions by B Communications
has improved and is supported by the unrestricted cash mechanism
provision in its Senior Secured Notes that were issued in February
2014 that allows the use of funds that are not pledged to the
holders of the Senior Secured Notes.
Accordingly, the Company’s management believes that B
Communications will act in the same manner as it did in November
2013 and May and August 2015, and that it will distribute most of
its retained earnings balance, so long as B Communications will
have sufficient resources to service its debt for a period of at
least 18 months and that the distribution meets the criteria for
distributions under Israeli law. This assumption does not
contradict the restrictions on distributing dividends under
applicable law and other restrictions applicable to B
Communications.
(5) The cash flows from the Company’s current operations include
the administrative operating costs and costs associated with the
Company being a dual-listed company traded on the NASDAQ Global
Select Market and on the Tel Aviv Stock Exchange.
(6) The repayment of principal and interest are based on the
repayment schedule for the Company’s outstanding debentures, in
addition to an assumed 0% annual increase in the Consumer Price
Index in 2015, an assumed 1.5% annual increase in the Consumer
Price Index in 2016 and an assumed 2% annual increase in the
Consumer Price Index in 2017.
The Company has additional cash
generating abilities that for conservative reasons were not taken
in to account in preparing the projected cash flow detailed above.
The following describes the Company's assumptions regarding these
scenarios:
A. All of the Company's shares in B Communications are free and
clear of any encumbrance. If necessary, the Company can sell some
of these shares, and will still remain the controlling shareholder
of B Communications. An example of this ability to sell shares of B
Communications is the sale of shares to Norisha Holdings Ltd. in
2013.
B. The Company has financial flexibility and quick access to
capital markets that enable it to raise funds within a short period
of time. This is evident from the debenture issuances and debenture
series exchanges that the Company completed in recent years.
The Company’s board of directors has reviewed the Company’s
liabilities, its existing and anticipated cash resources and needs
that were included in the framework of the projected cash flow
report, examined their scope and feasibility, as well as the timing
of their receipt, and found that all such assumptions and the
projections were reasonable and appropriate.
The Company’s board of directors examined the Company’s
anticipated resources and liabilities, and considering the
financial data in the above cash flow report and management’s
explanations of such data determined that the Company does not have
a liquidity problem and that for the duration of the projected
period for which cash flow information has been provided there is
no reasonable doubt that the Company will not meet its existing and
anticipated liabilities when due.
The information detailed above, concerning the Company’s cash
flow forecast, and particularly concerning the projected dividend
and yield on securities, are forward looking information as defined
in the Securities Law, 5728-1968. This information includes
forecasts, subjective assessments, estimates, etc. and is based,
among other things, on objective market forecasts and reviews
issued to the public, and relies, among other things, on the
company management’s past experience. Furthermore, some of such
information is based on future data and internal estimates by the
Company’s management made at the current time, and there is no
certainty that they will materialize, in whole or in part, due to
factors that are not in the Company’s control. It is hereby
clarified that there is a likelihood that said forward looking
information will not be realized, in whole or in part, both with
respect to the Company’s forecasts and with respect to the working
assumptions on which they are based.
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