Progress Towards Bezeq Acquisition: 012 Smile Communications Signs
Agreement for Sale of Telecommunications Business 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 / Tel: +972-72-200-3848 Internet Gold -
Golden Lines Ltd DATASOURCE: Internet Gold - Golden Lines Ltd
CONTACT: For further information, please contact: Ms. Idit Azulay,
Internet Gold, / Tel: +972-72-200-3848
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