278% Increase in Net Income for Nine Month Period PETACH TIKVA,
Israel, November 18 /PRNewswire-FirstCall/ -- 012
Smile.Communications (NASDAQ Global Market and TASE: SMLC), an
Israeli telecommunications service provider, today reported
financial results for the three and nine month periods ended
September 30, 2009. Results for the Third Quarter - Total revenues
increased by 4% to NIS 294 million (US $78 million) - Revenues from
the Broadband segment increased by 6% - Operating income increased
by 11% to NIS 37 million (US $10 million) - Net income increased by
19% to NIS 15 million (US $4 million) or NIS 0.59 per share (US
$0.16 per share) - Total of 136,000 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) Revenues for the
third quarter increased by 4% to NIS 294 million (US $78 million)
compared with NIS 282 million for the parallel period of 2008.
Revenues from broadband services increased by 6% to NIS 148 million
(US $39 million) for the period compared with NIS 140 million for
the third quarter of 2008. Revenues from traditional voice services
totaled NIS 146 million (US $39 million) compared to NIS 142
million for the same period in 2008. Operating income for the third
quarter increased by 11% to NIS 37 million (US $10 million)
compared with NIS 34 million for the third quarter of 2008.
Adjusted EBITDA for the third quarter increased by 11% to NIS 70
million (US $19 million) compared with NIS 63 million for the
parallel period of 2008. For more information regarding the use of
non-GAAP financial measures, please see the notes in this press
release. Net income for the quarter increased by 19% to NIS 15
million (US $4 million), or NIS0.59 per fully diluted share,
compared to NIS 13 million, or NIS 0.49 per fully diluted share,
for the third quarter of 2008. The Company's net financial debt as
of September 30, 2009 was NIS 145 million (US $39 million), a
decrease of NIS 157 million from NIS 302 million as of the end of
2008. The reduction reflects the Company's ability to pay down its
debt due to the positive cash flow it generated during the first
nine months of 2009. Comments of Management Commenting on the
results, Ms. Stella Handler, CEO of 012 Smile.Communications, said,
"We are pleased to report another quarter of strong revenues and
EBITDA, demonstrating the continued progress of our operating
segments, both of which are focused on increased efficiency and
growth. The combination of higher revenues and reduced operating
expenses has enabled us to deliver a 278% increase in our net
income for the nine-month period despite the strengthening of the
shekel against the U.S. dollar, a macroeconomic factor that has
increased our financing expenses significantly. In parallel, we
have achieved the customer acquisition targets that we set for
ourselves last year and are benefiting from a steady increase in
our retention rates." Ms. Handler continued, "As previously
announced, we recently entered into an agreement to acquire the
controlling stake of Bezeq, The Israel Telecommunication Corp.,
Israel's largest telecommunications provider (TASE: BZEQ). In
addition, as reported earlier this week, we signed an agreement
with a wholly owned subsidiary of Ampal-American Israel Corporation
(NASDAQ: AMPL) to sell 012 Smile.Communication's current ongoing
business for NIS 1.2 billion, or approximately $318 million. This
sale represents an important step in finalizing 012
Smile.Communication's agreement to acquire the controlling stake of
Bezeq, which we expect to occur prior to April 25, 2010."
Conference Call Information: Management will host an interactive
teleconference to discuss the results today, November 18, 2009, at
09:00 a.m. EDT. To participate, please call one of the following
access numbers several minutes before the call begins:
1-888-668-9141 from within the U.S. 0-800-917-5108 from within the
U.K., 1-866-485-2399 from Canada or +972-3-918-0610 from other
international locations. The call will also be broadcast live
through the company's Website, http://www.012.net/, and will be
available there for replay during the next 30 days. 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, 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 3.75
= 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. About 012 Smile.Communications 012 Smile.Communications
is a growth-oriented communication services provider in Israel with
a leading market position, offering a wide range of broadband and
traditional voice services. Its broadband services include
broadband Internet access with a suite of value-added services,
specialized data services and server hosting, as well as new
innovative services such as local telephony via voice over
broadband and a WiFi network of hotspots across Israel. Traditional
voice services include outgoing and incoming international
telephony, hubbing, roaming and signaling and calling card
services. 012 Smile.Communications services residential and
business customers, as well as Israeli cellular operators and
international communication services providers through its
integrated multipurpose network, which allows it to provide
services to almost all of the homes and businesses in Israel. 012
Smile is an owned subsidiary of Internet Gold Golden Lines Ltd.
(NASDAQ:IGLD) one of Israel's leading communications groups with a
major presence across all Internet-related sectors. In addition to
012 Smile, its 100% owned Smile.Media subsidiary manages a
portfolio of Internet portals and e-Commerce sites. Internet Gold
and 012 Smile are part of the Eurocom Communications Group. 012
Smile's shares trade on the NASDAQ Global Market and on the Tel
Aviv Stock Exchange. For additional information about 012
Smile.Communications Ltd., please visit the Company's investors'
site at http://www.012.net/. 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 012 Smile.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. 012 Smile.Communications Ltd.
Consolidated Balance Sheets Convenience translation into US Dollars
$1 = NIS 3.758 September December 31 September 30 30 2009 2008 2009
NIS thousands $ thousands Current assets Cash and cash equivalents
62,427 60,652 16,612 Marketable securities 315,585 76,742 83,977
Trade receivables, net of allowance for doubtful accounts of NIS
12,730 and NIS 13,139 at December 31, 2008 and September 30, 2009
188,852 203,009 50,253 Prepaid expenses and other current assets
20,667 23,038 5,499 Deferred tax assets - 17,838 - Total current
assets 587,531 381,279 156,341 Long-term trade receivables 6,260
6,350 1,666 Marketable securities - 152,020 - Assets held for
employee severance benefits 20,547 16,499 5,468 Property and
equipment, net 177,204 169,406 47,154 Other assets, net 316,960
291,607 84,343 Other intangible assets, net 157,138 174,640 41,814
Goodwill 411,171 411,171 109,412 Total assets 1,676,811 1,602,972
446,198 012 Smile.Communications Ltd. Consolidated Balance Sheets
Convenience translation into US Dollars $1 = NIS 3.758 September
December September 30 31 30 2009 2008 2009 NIS thousands $
thousands Liabilities and shareholders' equity Current liabilities
Current maturities of long-term obligations 67,884 99,295 18,064
Accounts payable 133,405 141,055 35,499 Loan from the parent
company 113,225 111,344 30,129 Other payables and accrued expenses
118,726 115,339 31,593 Parent company payable 2,577 1,410 686
Related parties payables 1,923 2,228 512 Deferred tax liabilities
3,448 - 918 Total current liabilities 441,188 470,671 117,401
Long-term liabilities Debentures 342,810 385,919 91,221 Long-term
obligations and other payables - 143 - Deferred tax liabilities
25,995 25,535 6,917 Liability for employee severance benefits
36,093 32,430 9,604 Total long-term liabilities 404,898 444,027
107,742 Shareholders' equity Ordinary shares NIS 0.1 par value
2,536 2,536 675 Additional paid-in capital 616,016 612,009 163,921
Accumulated other comprehensive income (loss) 33,925 (14,645) 9,027
Retained earnings 178,248 88,374 47,432 Total shareholders' equity
830,725 688,274 221,055 Total liabilities and shareholders' equity
1,676,811 1,602,972 446,198 012 Smile.Communications Ltd.
Consolidated Statements of Operations Convenience translation into
US Dollars $1 = NIS 3.758 Nine month Three-month period Nine-month
period period ended ended ended September 30 September 30 September
30 2009 2008 2009 2008 2009 NIS thousands $ thousands Revenue
293,703 281,803 869,008 808,767 231,242 Cost and operating
expenses: Cost of revenue 206,742 193,156 602,136 547,213 160,227
Selling and marketing 35,695 40,742 108,792 115,306 28,949 General
and administrative 13,919 14,118 39,279 42,399 10,452 Impairment
and other charges - - - 6,705 - Total operating expenses 256,356
248,016 750,207 711,623 199,628 Operating income 37,347 33,787
118,801 97,144 31,614 Financial (income) 21,740 17,966 (301) 65,311
(80) expenses Income before income taxes 15,607 15,821 119,102
31,833 31,694 Income tax expense, net 753 3,300 29,233 8,064 7,780
Net income 14,854 12,521 89,869 23,769 23,914 Earnings per share
Basic and diluted earnings per share 0.59 0.49 3.55 0.94 0.94
Weighted average number of ordinary shares used in calculation of
basic and diluted earnings per share 25,340,770 25,360,000
25,347,593 25,360,000 25,347,593 012 Smile.Communications Ltd.
Consolidated Statements of Cash Flows Convenience translation into
US Dollars $1 = NIS 3.758 Nine-month Three month period Nine month
period period ended ended ended September 30 September 30 September
30 2009 2008 2009 2008 2009 NIS thousands $ thousands Cash flows
from operating activities: Net income 14,854 12,521 89,869 23,769
23,914 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 31,086 27,541
86,828 81,047 23,105 Stock-based compensation 1,239 1,239 3,717
2,189 989 Deferred tax expenses (benefit) (1,964) (2,532) 6,318
(2,597) 1,681 Accrued interest on debentures 4,907 6,164 10,327
17,403 2,748 Increase in allowance for doubtful accounts, net 1,400
- 409 178 109 Increase (decrease) in employee severance benefits,
net (1,073) 38 (385) (906) (102) Linkage and interest differences
on long-term obligations, exchange rate difference and other 13,795
6,319 13,551 44,642 3,606 Realized and unrealized income on
marketable securities, net 459 12,624 (23,510) 8,118 (6,256)
Changes in assets and liabilities, net of effects of acquisition:
Trade receivables including non current portion 15,562 (6,151)
13,838 (7,446) 3,682 Prepaid expenses and other current assets
5,736 (215) 2,371 (372) 631 Other assets, net 115 125 330 358 88
Accounts payable (6,385) 13,869 (27,703) (25,839) (7,372)
Receivables (payables) from parent company and related parties, net
1,796 (10,363) 862 (5,060) 229 Other payables and accrued expenses
(17,905) (13,997) 3,387 3,822 901 Net cash provided by operating
activities 63,622 47,182 180,209 139,306 47,953 Cash flows from
investing activities: Purchase of property and equipment and other
assets (12,878) (16,385) (48,821) (39,882) (12,990) Investment in
trading marketable securities (84,647) (113,900) (197,675)
(312,554) (52,601) Proceeds from sale of marketable securities
45,187 43,523 199,122 80,440 52,986 Net cash used in investing
activities (52,338) (86,762) (47,374) (271,996) (12,605) Cash flows
from financing activities: Changes in short-term bank credit, net -
1,880 - (527) - Payments in respect of long-term finance
arrangement (10,048) (6,046) (36,599) (19,018) (9,739) Purchase of
treasury shares at cost - - (468) - (125) Repayment of debentures -
- (99,960) - (26,599) Net cash used in financing activities
(10,048) (4,166) (137,027) (19,545) (36,463) Changes in cash and
cash equivalents 1,236 (43,746) (4,192) (152,235) (1,115) Effect of
exchange rate changes 281 2,499 5,967 (24,829) 1,588 Cash and cash
equivalents at beginning of the year 60,910 94,078 60,652 229,895
16,139 Cash and cash equivalents at end of year 62,427 52,831
62,427 52,831 16,612 012 Smile.Communications Ltd. Reconciliation
Table of Non-GAAP Measures Convenience translation into US Dollars
$1 = NIS 3.758 Nine-month Three month period Nine month period
period ended ended ended September 30 September 30 September 30
2009 2008 2009 2008 2009 NIS thousands $ thousands GAAP operating
37,347 33,787 118,801 97,144 31,614 income Adjustments Amortization
of acquired intangible assets 5,720 6,820 17,160 20,460 4,565 Other
charges - - - 6,705 - Expenses recorded for stock compensation in
accordance with ASC 718 (previously SFAS 123(R)) 1,239 1,239 3,717
2,189 989 Non-GAAP adjusted operating income 44,306 41,846 139,678
126,498 37,168 GAAP tax expenses, net 753 3,300 29,233 8,064 7,780
Adjustments Amortization of acquired intangible assets Included in
tax expenses, net 8,787 1,841 11,761 5,524 3,128 Non-GAAP tax
expenses, net 9,540 5,141 40,994 13,588 10,908 Net income as
reported 14,854 12,521 89,869 23,769 23,914 Taxes on income 753
3,300 29,233 8,064 7,780 Other charges - - - 6,705 - Expenses
recorded for stock compensation in accordance with SFAS 123(R)
1,239 1,239 3,717 2,189 989 Financial (income) expenses 21,740
17,966 (301) 65,311 (80) Depreciation and amortization 31,086
27,541 86,828 81,047 23,104 Adjusted EBITDA 69,672 62,567 209,346
187,085 55,707 For further information, please contact: 012
Smile.Communications Ltd +972-72-2003848 Investor relations
contacts: Mor Dagan - Investor Relations / Tel: +972-3-516-7620
Garth Russell - KCSA Strategic Communications / Tel:
+1-212-896-1250 DATASOURCE: 012 Smile.communications Ltd. CONTACT:
For further information, please contact: 012 Smile.Communications
Ltd, +972-72-2003848, ; Investor relations contacts: Mor Dagan -
Investor Relations, / Tel: +972-3-516-7620; Garth Russell - KCSA
Strategic Communications, / Tel: +1-212-896-1250
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