Successful Raise of $105 Million in Debentures; Company Enters Next
Phase of Long-Term Growth Strategy PETACH TIKVA, Israel, November
28 /PRNewswire-FirstCall/ -- Internet Gold Golden Lines Ltd.,
(NASDAQ NMS and TASE: IGLD) today reported its financial results
for the three and nine months ended September 30, 2007. Highlights
- Successful raise of $105 million in debentures: IGLD is now well
positioned for the next phase of growth and expansion through
accretive M&A's in Israel and other emerging markets - IPO of
IGLD's subsidiary 012 Smile.Communications recently completed on
NASDAQ along with dual listing on the TASE (Symbol: SMLC). Internet
Gold expects to report a capital gain of approximately $28 million
before tax effect in Q4 2007 as a result of the IPO. - Merger of
012 Smile.Communications and 012 Golden Lines recently completed
ahead of schedule and under budget yielding ongoing reduction in
expenses due to synergies achieved. - Continued performance
according to original plan, reaching adjusted EBITDA of NIS 62.9
million for the quarter. Results for the Third Quarter Revenues for
the third quarter of 2007 were NIS 299.0 million (US $74.5
million), an increase of 188% compared with NIS 104.0 million for
the third quarter of 2006. On a pro-forma basis, this represented
an increase of 3.8% compared with the third quarter of 2006. Note:
pro-forma results are provided to assist the reader in comparing
Internet Gold's 2007 results, which include the full contribution
of the merger as of January 1, 2007 of Smile.Communications with
012 Golden Lines, with 2006 results which do not include the
results of 012 Golden Lines. Pro-forma results combine 012 Golden
Lines' results for the third quarter of 2006 with Internet Gold's
results for the same period. Operating income for the third quarter
of 2007 increased by 162% to NIS 30.9 million (US $7.7 million)
compared with NIS 11.8 million for the third quarter of 2006.
Operating margin for the 2007 period on a GAAP basis was 10%, while
on a non-GAAP basis it was NIS 41.9 million, or 14%. The difference
between GAAP and non-GAAP operating income relates to the
amortization of NIS 8.0 million (US $2.0 million) of intangible
assets acquired as part of the acquisition of 012 Golden Lines, and
non-recurring expenses of NIS 3 million (US$ 0.75 million) related
to charges incurred in connection with the merger of
Smile.Communications and 012 Golden Lines. Net income for the third
quarter of 2007 increased by 39% to NIS 9.7 million (US $2.4
million), or NIS 0.44 (US$ 0.11) per share, compared with NIS 7.0
million, or NIS 0.38 per share, for the third quarter of 2006.
Impacting net income were NIS 19.4 million of financial expenses
due to exceptionally high 2.5% CPI increase during the third
quarter of 2007. In addition, non-recurring operating expenses of
NIS 3.0 million (US$ 0.75 million), related to charges incurred in
connection with the merger of 012 Smile.Communications and 012
Golden Lines also reduced net income. Adjusted EBITDA(1) for the
quarter reached NIS 62.9 million (US $15.7 million), a 29% increase
compared with the adjusted pro-forma EBITDA(1) of the third quarter
of 2006. Comments of Management Commenting on the results, Eli
Holtzman, Internet Gold's CEO, said, "The recent completion of 012
Smile.Communications' IPO marks the success of an intensive
eighteen month process during which we scaled up our operations,
increased our capital platform, expanded the strength of our brands
and established thriving stand alone communications and media
subsidiaries. As one of Israel's major communications and Internet
groups, we are now ready to launch into a new growth phase. Our
plan is to leverage our formidable strategic assets - our superb
management team, proven brand-building and marketing expertise,
operational excellence, financial engineering and capital strength
- via new activities aimed at expanding our market share,
consolidating domestic markets, and seeking out new, adjacent
opportunities in Israel and abroad. "As the first phase in the
execution of our strategy, our group completed two public
offerings. The parent company, Internet Gold, issued $105 million
of debt securities on the TASE, providing it with the resources to
further diversify and expand into adjacent emerging communications
markets. In parallel, we are pleased that 012 Smile.Communications
completed its IPO on the NASDAQ Global Market, raising $74 million
that will fuel its synergistic growth plans and enable it to fully
leverage its current operational know-how and experience. We
believe that Internet Gold's M&A-focused growth strategy,
coupled with 012 Smile.Communications' synergistic growth plan and
improved leverage as an independent public company, will result in
the creation of significant value for our shareholders over the
long term." Overview of Business Segments 012 Smile.Communications
Ltd. (NASDAQ and TASE: SMLC): Revenues for the third quarter of
2007 increased by 219% compared with Q3 2006, reaching NIS 280.3
million (US $69.8 million). Non-GAAP adjusted operating income for
the third quarter reached NIS 41.9 million (US $10.4 million) and
adjusted EBITDA reached NIS 61.4 million (US $15.3 million).
Recently, 012 Smile.Communications' merger process was completed
ahead of schedule and under budget. 012 Smile.Communications'
businesses continued to benefit from a growing customer base and
the consolidated market's stable ARPUs. 012 Smile.Communications is
now focused on building market share in all of its business
segments while leveraging additional operational and marketing
synergies made possible by the merger. Smile.Media Ltd.: Revenues
for the third quarter of 2007 were NIS 19.6 million (US $4.9
million), an increased of 23% YOY and similar compared with 2nd
quarter. Non-GAAP operating margin for the period was 7%, while
EBITDA(1) margin was 14%. The decrease in operating margins was due
to higher expenses in additional technical platforms and
applications and new portal content. This trend continues into the
4th quarter with the goal of accelerating growth during 2008. As
part of this effort, management is forming strategies aimed at
further consolidation of the domestic market and identification of
opportunities in adjacent markets both in Israel and abroad. Other:
During the third quarter and immediately thereafter, Internet
Gold's management focused on the completion of the 012
Smile.Communications IPO and the development of the 2008 work plan
for all activities. In addition to the operations of 012 Smile and
Smile.Media, Internet Gold incurred operating expenses of
approximately NIS 1.3 million (US $0.3 million) for the quarter.
These expenses were primarily for the development of new joint
ventures and for activities related to the Company's listing on
public securities exchanges Internet Gold's Results for the Nine
Month Period Ended September 30, 2007: Internet Gold's revenues for
the nine months ended September 30, 2007 were NIS 891.5 million
(US$ 222.2 million), an increase of 205% compared with NIS 292.6
million recorded in the comparable period in 2006. On a pro-forma
basis, this represented an increase of 10.6%. Operating income for
the nine months ended September 30, 2007 increased by 185% to NIS
94.2 million (US $23.5 million) compared with NIS 33 million for
the comparable period in 2006. Operating margin for the period on a
GAAP basis was 11%, while on a non-GAAP basis it was 13.9%, and
reached NIS 123.2 million. The difference between GAAP and non-GAAP
operating income relates to the amortization of NIS 24 million (US
$6.0 million) of intangible assets acquired as part of the
acquisition of 012 Golden Lines and non-recurring expenses of NIS 5
million (US$ 1.25 million) related to charges incurred in
connection with the merger of Smile.Communications and 012 Golden
Lines. Net income for the nine months ended September 30, 2007
increased by 149% to NIS 50.6 million (US $12.6 million), or NIS
2.41 (US$ 0.6) per share, compared with NIS 20.3 million, or NIS
1.1 per share, for the first nine months of 2006. Impacting net
income were non-recurring operating expenses of NIS 5.0 million
(US$ 1.25 million), relating to charges incurred in connection with
the merger of Smile.Communications and 012 Golden Lines. Increase
in the Number of Outstanding Shares of Internet Gold In April 2005,
Internet Gold completed an offering in Israel of NIS 220 million of
convertible bonds that were scheduled to be repaid during the
period April 2008 through April 2015 and warrants to purchase 2.5
million ordinary shares that were exercisable until October 15,
2007. The bonds are convertible into ordinary shares at a
conversion price of NIS 40 ($9.96) per share until March 2008, at
which time the conversion price will increase to NIS 50 ($12.50).
Beginning in the fourth quarter of 2006 holders of the bonds and
warrants began to convert their bonds and exercise the warrants. As
at September 30, 2007, bond and warrant holders had converted NIS
103.7 million ($25.8 million) of the bonds into 2,590,983 ordinary
shares and exercised 1,184,328 warrants. Subsequent to September
30, 2007 and through October 15, 2007, all of the remaining
outstanding warrants had been exercised at a conversion price of
NIS 42.22 ($ 10.52), with company receiving NIS 55.3 million ($13.8
million) in proceeds from the exercise of the warrants.
Reconciliation Between Results on a GAAP and Non-GAAP Basis
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.
Purchase Price Allocation Final determination of the purchase price
allocation of certain intangible assets acquired as part of the
acquisition of 012 Golden Lines is not yet complete, and is subject
to revision. Any revisions made to the current calculation will
change the amount of the purchase price allocable to goodwill. We
are still evaluating the amortization method to be utilized with
regard to the intangible assets acquired. In the interim, the
Company recorded NIS 24 million (US $6.0 million) in amortization
costs in the nine months ended September 30, 2007, reflecting a
conservative amortization according to the economic benefit
expected from those intangible assets. (1) 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 tax expenses, depreciation and amortization.
On a pro forma basis, we define adjusted EBITDA as net income
before financial income (expenses), net, impairment and other
charges, income tax expenses, depreciation and amortization and
income from discontinued operations. 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 on periods or companies of changes in
effective tax rates or net operating losses or, most recently, our
provision for tax expenses) 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 prospectus, may not be comparable to similarly titled measures
reported by other companies due to differences in the way that
these measures are calculated. Our use of adjusted EBITDA is
detailed more fully in "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Non-GAAP Financial
Measures" and reflects our belief that the non-GAAP financial
information is important for the understanding of our operations.
We define non-GAAP adjusted EBIT (earnings before interest and
taxes) as net income before interest and taxes net amortization
with regard to the intangible assets acquired as part of the
acquisition of 012 Golden Lines and non-recurring expenses relating
to charges incurred in connection with the merger of
Smile.Communications and 012 Golden Lines. NOTE A: Convenience
Translation to Dollars For the convenience of the reader, the
reported NIS figures of September 30, 2007 have been presented in
thousands of U.S. dollars, translated at the representative rate of
exchange as of September 30, 2007 (NIS 4.0130 = 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
Internet Gold Internet Gold is one of Israel's leading
communications groups with a major presence across all
Internet-related sectors. In addition to its 012 Smile subsidiary,
its 100% owned Smile.Media subsidiary manages a growing portfolio
of Internet portals and e-Commerce sites. Internet Gold is part of
the Eurocom Communications Group and its shares and the shares of
012 Smile trade on the NASDAQ Global Market and on the Tel Aviv
Stock Exchange. Consolidated Balance Sheets Convenience translation
into U.S. dollars $1 = NIS 4.013 September September December
September 30 30 31 30 2007 2006 2006 2007 (Unaudited) (Unaudited)
(Audited) (Unaudited) NIS thousands $ thousands Current assets Cash
and cash equivalents 490,193 261,322 320,479 122,151 Trade
receivables, net 251,497 76,968 220,734 62,671 Other receivables
25,409 20,822 27,372 6,332 Deferred taxes 8,319 732 2,393 2,073
Total current assets 775,418 359,844 570,978 193,227 Investments
Long-term trade receivables 1,950 - 2,951 486 Deferred taxes 21,862
139 157 5,448 Investments in investee companies 552 634 552 137
24,364 773 3,660 6,071 Property and equipment, net 161,092 37,440
159,692 40,143 Goodwill, other assets and deferred charges 942,813
114,310 949,267 234,940 Total assets 1,903,687 512,367 1,683,597
474,381 Consolidated Balance Sheets (cont'd) Convenience
translation into U.S. dollars $1 = NIS 4.013 September September
December September 30 30 31 30 2007 2006 2006 2007 (Unaudited)
(Unaudited) (Audited) (Unaudited) NIS thousands $ thousands Current
liabilities Short-term bank credit 171,751 15,994 364,862 42,799
Current maturities of long-term obligations 4,805 14,417 18,674
1,197 Accounts payable 206,033 42,168 193,144 51,342 Payable in
respect of 012 - - 584,621 - acquisition Current maturities of
convertible debentures 15,354 - - 3,826 Other current liabilities
62,615 24,324 46,224 15,603 Total current liabilities 460,558
96,903 1,207,525 114,767 Long term liabilities Long-term loans and
other long-term obligations 62,689 22,129 20,386 15,621 Liability
for termination of employer- employee relations, net 15,536 7,268
14,844 3,871 Deferred taxes 46,450 - 51,512 11,576 Debentures
839,284 - - 209,141 Convertible debentures 97,036 208,148 198,998
24,181 Total long term liabilities 1,060,995 237,545 285,740
264,390 Total liabilities 1,521,553 334,448 1,493,265 379,157
Minority interest 161 - 89 40 Shareholders' equity 381,973 177,919
190,243 95,184 Total liabilities and 1,903,687 512,367 1,683,597
474,381 shareholders' equity Consolidated Statements of Operations
Convenience translation into dollars $1 = NIS 4.013 Nine month Nine
month period Three month period Year period ended ended ended ended
September 30 September 30 December September 31 30 2007 2006 2007
2006 2006 2007 (Unaudited) (Unaudited) (Audited)(Unaudited) NIS
thousands $ in thousands Revenues 891,447 292,601 298,885 103,907
408,359 222,140 Costs and expenses Cost of revenues 608,776 178,023
202,164 64,000 252,413 151,701 Selling and marketing expenses
133,382 56,215 44,967 19,378 75,576 33,238 General and
administrative 50,087 25,332 17,858 8,709 33,957 12,481 expenses
Non-recurring 4,978 - 3,073 - 12,813 1,240 expenses Total costs and
797,223 259,570 268,062 92,087 374,759 198,660 expenses Income from
94,224 33,031 30,823 11,820 33,600 23,480 operations Financing
expenses, 44,831 8,613 19,406 1,797 5,615 11,346 net Other (income)
expenses, net - 2,790 - 2,823 - - Income before tax 49,393 21,628
11,417 7,200 27,985 12,134 expenses Tax expenses (1,409) 1,067
1,572 264 1,286 (351) (benefit) Company's share in net loss of
unconsolidated - 308 - 68 334 - investee Minority interest in
operations of consolidated 164 (56) 189 (56) 34 41 subsidiaries Net
income 50,638 20,309 9,656 6,924 26,331 12,444 Income (loss) per
share, basic Net income per 2.41 1.10 0.44 0.38 1.43 0.6 share (in
NIS) Weighted average number of shares outstanding (in thousands)
21,027 18,432 22,130 18,432 18,438 21,027 Income (loss) per share,
diluted Net income per 2.37 1.10 0.43 0.38 1.43 0.59 share (in NIS)
Weighted average number of shares outstanding (in thousands) 21,378
18.432 22,351 18,432 18,438 21,378 Internet Gold - Golden Lines
Ltd. Reconciliation Table Of Non-Gaap Measures (NIS In thousands)
Nine Months Period Three Months Ended September 30, Period Ended
September 30, 2007 2006 2007 2006 (Unaudited) (Unaudited) GAAP
operating income 94,224 33,031 30,823 11,820 Adjustments
Amortization of acquired intangible assets 23,955 7,985
Non-recurring expenses 4,978 - 3,073 - Non-GAAP adjusted operating
income 123,157 33,031 41,881 11,820 GAAP tax expenses, (benefit)
(1,409) 1,067 1,572 264 Adjustments Amortization of acquired
intangible assets Included in tax expenses, (benefit) 5,970 - 2,316
- Non-GAAP tax expenses 4,561 1,607 3,888 264 Net Income As
Reported 50,638 20,309 9,656 6,924 Minority Interest In Operations
Of Consolidated Subsidiaries 164 (56) 189 (56) Company's Share In
Net Loss Of Investees - 308 - 68 Taxes On Income (1,409) 1,067
1,572 264 Other income, net 2,790 - 2,823 Non-recurring Expenses
4,978 - 3,073 - Financial Expenses, net 44,831 8,613 19,406 1,797
Depreciation & Amortization 91,704 18,845 28,948 7,118 Adjusted
EBITDA 190,906 51,876 62,844 18,938 For further information, please
contact: Lee Roth - KCSA Worldwide / Tel: +1-212-896-1209 Mor Dagan
- Investor Relations / Tel:+972-3-516-7620 Ms. Idit Azulay,
Internet Gold / Tel: +972-72-200-3848 DATASOURCE: Internet Gold
CONTACT: For further information, please contact: Lee Roth - KCSA
Worldwide, , Tel: +1-212-896-1209; Mor Dagan - Investor Relations,
, Tel:+972-3-516-7620; Ms. Idit Azulay, Internet Gold, , Tel:
+972-72-200-3848
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