SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
F O R M 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2007
INTERNET GOLD-GOLDEN LINES LTD.
(Name of Registrant)
1 Alexander Yanai Street Petach-Tikva, Israel
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
Indicate by check mark whether by furnishing the information
contained in this Form, the registrant is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82-___________
Internet Gold-Golden Lines Ltd.
6-K Items
1. Press Release re Internet Gold Reports Q2 Results: Merger Increases
Profitability dated August 14, 2007.
ITEM 1
Press Release Source: Internet Gold
Internet Gold Reports Q2 Results: Merger Increases Profitability
Tuesday August 14, 2:18 am ET
Highest-Ever Non-GAAP Adjusted Operating Income, Net Income & Adjusted
EBITDA (1)
PETACH TIKVA, Israel, August 14 /PRNewswire-FirstCall/ -- Internet Gold,
(NASDAQ: IGLD ; TASE: IGLD) today reported its financial results for the second
quarter and six months ended June 30, 2007.
Major Events of the Second Quarter
- Rising profitability due to synergies of merger with 012 Golden Lines
- Continued ARPU stability in a consolidated marketplace
- Launch of VOB services and entry into $1B domestic telephony market
- Highest-Ever Non-GAAP Adjusted Operating Income of NIS 42M and adjusted EBITDA
of NIS 65M.
- Continued growth in e-Advertising activity
- Transition process of P1000 e-Commerce site to new Commerce Server platform
and weakness of the dollar together reduced revenues by approximately NIS 6M
Results for the Second Quarter
Revenues for the second quarter of 2007 were NIS 296.3 million (US $69.7
million), an increase of 209% compared with NIS 95.8 million for the second
quarter of 2006. On a pro-forma basis, this represented an increase of 12%
compared with the second 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 its merger with 012
Golden Lines, with 2006 results, which were before the merger. Pro-forma results
combine 012 Golden Lines' results for the second quarter of 2006 with Internet
Gold's results for the same period.
Revenues for the quarter were impacted by two factors: the temporary
intermediate closures of the Company's P1000 e-Commerce site during its platform
upgrade, resulting in lost revenues of approximately NIS 2.5 million; and the
weakness of the dollar compared with the shekel during April and May, which
reduced revenues as expressed in shekels by approximately NIS 3.5 million.
Operating income for the quarter increased by 163% to a record NIS 30.3 million
(US $7.1 million) compared with NIS 11.5 million for the second quarter of 2006.
Operating margin for the period on a GAAP basis was 10%, while on a non-GAAP
basis it was 14%, and reached NIS 42 million. The difference between GAAP and
non-GAAP operating income relates amortization of NIS 10.3 million (US $2.4
million) with regard to the intangible assets acquired as part of the
acquisition of 012 Golden Lines and non-recurring expenses of NIS 1.5 million
(US$ 0.35 million), relating to charges incurred in connection with the merger
of Smile.Communications and 012 Golden Lines.
Net income for the second quarter of 2007 increased by 233% to a record NIS 22.5
million (US $5.3 million), or NIS 1.06 (US$ 0.25) per share, compared with NIS
6.8 million, or NIS 0.37 per share, for the second quarter of 2006. Impacting
net income were non-recurring operating expenses of NIS 1.5 million (US$ 0.35
million), relating to charges incurred in connection with the merger of
Smile.Communications and 012 Golden Lines. In addition, net income also includes
an income tax benefit of NIS 6.5 million (US $1.5 million), which is primarily
attributable to the tax benefit associated with Smile.Communications' tax loss
carry forward.
Adjusted EBITDA (1) for the quarter reached NIS 65 million (US $15.3 million),
an increase of 19% compared with the second quarter of 2006 adjusted pro-forma
EBITDA (1).
Comments of Management
Commenting on the results, Eli Holtzman, Internet Gold's CEO, said, "We are
pleased to report that the progress on our merger plan continues to be on-track,
and we are now entering its final stage. The synergies that we have achieved to
date have already increased our profitability to a record level; however, we
expect to realize the full effect of the merger's synergies towards early 2008.
As we move beyond the merger, our focus will be to continue building our share
of our growing communications and media markets."
Overview of the Company's Activities By Subsidiary
012 Smile.Communications Ltd.: Revenues for the second quarter of 2007 increased
by 250% compared with Q2 2006, reaching NIS 277.3 million (US $65.3 million).
However, revenues were negatively impacted by the weakness of the dollar as
compared to the shekel during April and May, which reduced the subsidiary's
sales as expressed in shekel terms by approximately NIS 3.5 million. Non-GAAP
adjusted operating income for the second quarter reached NIS 40.3 million (US
$9.5 million) and adjusted EBITDA reached NIS 62 million (US $14.6 million).
Commenting on the results, Ms. Stella Handler, CEO of 012 Smile.Communications,
said, "We are pleased to report another solid quarter marked by record profits,
rising profitability and a stronger-than-ever platform for our future growth.
The merger has taken our revenues and profitability to a new level, while also
leveraging our launch of local telephony - VOB (Voice Over Broadband). This has
positioned us as a growth-oriented communications group that is well-positioned
to identify, lead and benefit from long-term market trends, particularly the
stabilization of ARPUs (Average Revenues Per User) and the steady growth of data
and voice service outlays. The goal of our work plan is to take full advantage
of each of these innovative services to drive significant future growth."
ISP (Internet Access Services): the Company continues to benefit from the
consolidated market's stable ARPUs and a steadily rising broadband customer
base.
- VOB (Voice Over Broadband Domestic Telephony Services): during the quarter,
the Company became the first ISP to launch domestic VOB services. As a result of
a legal claim made by one of its competitors against the Ministry of
Communications, after the end of the quarter, on July 8, 2007, the Company was
ordered by the Supreme Court to temporarily discontinue its mass-media
advertising campaigns for its VOB service until a final ruling is made. As such,
the Company is now limited its VOB marketing to its existing customer base
through direct channels. The company is on track with its original VOB work plan
in regards to number of new subscribers acquired
- ILD (International Long Distance Services): the merger of 012 Golden Lines and
Smile.Communications has enabled the consolidation of 012- and 015-branded
services, contributing significantly to the Company's profitability.
Smile.Media Ltd.: Revenues for the second quarter of 2007 were NIS 19.6 million
(US $4.6 million) reflecting the temporary and intermittent closures of the
Company's P1000 e-Commerce site that occurred during its platform upgrade,
resulting in lost revenues of approximately NIS 2.5 million. Operating margin
for the period was 15%, while EBITDA (1) margin was 21%.
Mr. Holtzman concluded, "We continue to benefit from a significant ramp-up of
Internet media budgets, a trend which we believe has the power to become a
significant driver of our growth over the long-term. We believe the strong and
diversified portfolio of Internet properties that we have built over the past
few years is positioning us to take full advantage of the online advertising
market's accelerating momentum."
Internet Gold - Golden Lines Ltd.: In addition to the activities of
Smile.Communications and Smile.Media, the Company incurred operating expenses of
approximately NIS 1.2 million (US 0.3 million) for the quarter. These expenses
were primarily for the development of new joint ventures, and for activities
related to the Company's listing on public securities exchanges, including
expenses such as: Investor Relations, Sarbanes Oxley compliance, insurance and
legal expenses.
Results for the First Half
Revenues for the first half of 2007 were NIS 592.6 million (US$ 139.5 million),
an increase of 214% compared with NIS 188.7 million recorded in the first half
of 2006. On a pro-forma basis, this represented an increase of 14%.
Operating income for the first half of 2007 increased by 199% to a record NIS
63.4 million (US $14.9 million) compared with NIS 21.2 million for the first
half of 2006. Operating margin for the period on a GAAP basis was 11%, while on
a non-GAAP basis it was 14%, and reached NIS 81.3 million. The difference
between GAAP and non-GAAP operating income relates amortization of NIS 16
million (US $3.8 million) with regard to the intangible assets acquired as part
of the acquisition of 012 Golden Lines and non-recurring expenses of NIS 1.9
million (US$ 0.45 million), relating to charges incurred in connection with the
merger of Smile.Communications and 012 Golden Lines.
Net income for the first half of 2007 increased by 206% to a record NIS 41
million (US $9.6 million), or NIS 2 (US$ 0.47) per share, compared with NIS 13.4
million, or NIS 0.73 per share, for the first half of 2006. Impacting net income
were non-recurring operating expenses of NIS 1.9 million (US$ 0.45 million),
relating to charges incurred in connection with the merger of
Smile.Communications and 012 Golden Lines. In addition, Net income also includes
net income tax incurred during the first half of NIS 3 million (US $0.7 million)
including the tax benefit associated with Smile.Communications' tax loss carry
forward.
Increase in Number of IGLD Shares Outstanding:
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 are exercisable until October 15, 2007. The bonds are convertible into
ordinary shares at a conversion price of NIS 40 ($9.41) per share until March
2008, at which time the conversion price will increase to NIS 50 ($11.80). The
exercise price of the warrants is currently NIS 41.5 ($9.80), which price is
linked to Israeli Consumer Price Index. Beginning in the fourth quarter of 2006
holders of the bonds and warrants began to convert their bonds and exercise the
warrants. As at June 30, 2007, bond and warrant holders had converted NIS 93.5
million ($22.0 million) of the bonds into 2,338,415 ordinary shares and
exercised 1,095,009 warrants. Subsequent to Jun 30, 2007 and through August 5,
2007, bond holders had converted an additional NIS 10.1 million ($2.4 million)
of the bonds into 252,026 ordinary shares and warrants to purchase an additional
62,248 ordinary shares had been exercised, with the Company receiving NIS 2.6
million ($0.6 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 16
million (US $3.8 million) in amortization costs in the first half of year 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.
About Internet Gold
Internet Gold is one of Israel's leading communications groups with a major
presence across all Internet-related sectors. Its 012 Smile.Communications 100%
owned subsidiary is one of Israel's major Internet and International Telephony
service providers, and one of its largest providers of enterprise/IT integration
services. 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 trade
on the Nasdaq Global Market and on the Tel Aviv Stock Exchange.
For additional information about Internet Gold, please visit its investors' site
at http://www.igld.com.
Certain statements made herein that use the words "estimate," "project,"
"intend," "expect," "believe" and similar expressions are intended to identify
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements involve known
and unknown risks and uncertainties which could cause the actual results,
performance or achievements of the Company to be materially different from those
which may be expressed or implied by such statements, including, among others,
changes in general economic and business conditions and specifically, decline in
demand for the Company's services, inability to timely develop and introduce new
technologies, services and applications and loss of market share and pressure on
prices resulting from competition. For additional information regarding these
and other risks and uncertainties associated with the Company's business,
reference is made to the Company's Annual Report filed with the Securities and
Exchange Commission and its other reports as filed from time to time with the
Securities and Exchange Commission.
NOTE A: Convenience Translation to Dollars
For the convenience of the reader, the reported NIS figures of June 30, 2007
have been presented in thousands of U.S. dollars, translated at the
representative rate of exchange as of June 30, 2007 (NIS 4.2490 = 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.
Consolidated Balance Sheets
Convenience
translation
into
US Dollars
NIS
4.249=US$1
June 30 June 30 December 31 June 30
2007 2006 2006 2007
(Unaudited) (Unaudited) (Audited) (Unaudited)
New Israeli Shekels US$
thousands - in thousands
Current assets
Cash and cash
equivalents 96,477 257,512 320,479 22,706
Short-term investment 418 1,264 883 98
Trade receivables, net 244,016 76,786 220,734 57,429
Other receivables 31,813 15,867 26,489 7,487
Deferred taxes 2,199 742 2,393 518
Total current assets 374,923 352,171 570,978 88,238
Long-term trade
receivables 1,800 - 2,951 424
Investments in investee
companies 579 406 552 136
Deferred taxes 192 148 157 45
2,571 554 3,660 605
Property and equipment,
net 161,254 35,855 159,692 37,951
Goodwill, other assets
and deferred
charges 945,187 110,021 949,267 222,449
Total assets 1,483,935 498,601 1,683,597 349,243
Internet Gold - Golden Lines Ltd.
Consolidated Balance Sheets
Convenience
translation
into
US Dollars
NIS
4.249=US$1
June 30 June 30 December 31 June 30
2007 2006 2006 2007
(Unaudited) (Unaudited) (Audited) (Unaudited)
New Israeli Shekels US$
thousands - in thousands
Liabilities and other
obligations
Short-term bank loans 189,949 13,067 372,039 44,704
Accounts payable 229,725 55,841 204,641 54,066
Other payables 60,911 22,262 630,845 14,335
Current maturities from
convertible
debentures 16,278 - 3,831
Debentures 433,115 - - 101,933
Convertible debentures 102,382 206,969 198,998 24,096
Long-term loans and other
long-term
obligations 51,452 22,236 20,386 12,109
Liability for termination
of employer-
employee relations, net 13,987 7,229 14,844 3,292
Deferred taxes 26,529 - 51,512 6,244
Total liabilities 1,124,328 327,604 1,493,265 264,610
Minority interest - - 89 -
Shareholders' equity 359,607 170,997 190,243 84,633
Total liabilities and
shareholders' equity 1,483,935 498,601 1,683,597 349,243
Internet Gold - Golden Lines Ltd.
Consolidated Statements of Operations
Six-month period ended Three-month period ended
June 30 June 30
2007 2006 2007 2006
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
NIS thousands (except per share data)
Revenues 592,562 188,694 296,310 95,849
Costs and
expenses:
Cost of revenues 406,612 114,023 202,501 56,921
Selling and
marketing
expenses 88,415 36,837 45,624 19,052
General and
administrative
expenses 32,229 16,623 16,446 8,329
Non - recurring
expenses 1,905 - 1,445 -
Total costs and
expenses 529,161 167,483 266,016 84,302
Income from
operations 63,401 21,211 30,294 11,547
Financing
expenses, net 25,425 6,814 14,273 4,255
Other income, net - (33) - (10)
Net income after
financing expenses 37,976 14,430 16,021 7,302
Tax expenses
(benefit) (2,981) 803 (6,501) 205
Income after tax 40,957 13,627 22,522 7,097
Company's share in
net
loss of
unconsolidated
investee 1 240 - 240
Minority interest
in
operations of
consolidated
subsidiaries (26) - 18 95
Net income 40,982 13,387 22,504 6,762
Earnings per share
-basic
Net income per
share 2.0 0.73 1.06 0.37
Weighted average
number
of shares used in
the
calculation (in
thousands) 20,463 18,432 21,178 18,432
Earnings per share
-
diluted
Net income per
share 1.92 0.73 1.06 0.37
Weighted average
number
of shares used in
the
calculation (in
thousands) 24,064 18,432 24,765 18,432
Convenience
translation
into
US Dollars
NIS
4.249=US$1
Six month
Year ended period
ended
December 31 June 30
2006 2007
(Audited) (Unaudited)
US$
thousands
Revenues 408,359 139,459
Costs and
expenses:
Cost of revenues 252,413 95,696
Selling and
marketing
expenses 75,576 20,808
General and
administrative 33,957 7,585
expenses
Non - recurring 12,813 448
expenses
Total costs and 374,759 124,537
expenses
Income from 33,600 14,922
operations
Financing 5,615 5,984
expenses, net
Other income, net - -
Net income after
financing expenses 27,985 8,938
Tax expenses 1,286 (702)
(benefit)
Income after tax 26,699 9,640
Company's share in
net
loss of
unconsolidated
investee 334 -
Minority interest
in
operations of
consolidated
subsidiaries 34 (6)
Net income 26,331 9,646
Earnings per share
-basic
Net income per 1.43 0.47
share
Weighted average
number
of shares used in
the
calculation (in 18,438 20,463
thousands)
Earnings per share
-
diluted
Net income per 1.43 0.45
share
Weighted average
number
of shares used in
the
calculation (in 18,438 24,064
thousands)
Internet Gold - Golden Lines Ltd.
Reconciliation Table Of Non-Gaap Measures
(NIS In thousands)
Six Months Period Three Months
Ended June 30, Period Ended June 30,
2007 2006 2007 2006
(Unaudited) (Unaudited)
GAAP operating income 63,401 21,211 30,294 11,547
Adjustments
Amortization of acquired
intangible assets 15,969 10,264
Non-recurring expenses 1,905 - 1,445 -
Non-GAAP adjusted
operating income 81,275 21,211 42,003 11,547
GAAP tax expenses
(benefit), net (2,981) 803 (6,501) 205
Adjustments
Amortization of acquired
intangible assets
Included In tax expenses,
net 4,631 - 2,976 -
Non-GAAP tax expenses
(benefit), net 1,650 803 (3,525) 205
Net Income As Reported 40,982 13,387 22,504 6,762
Minority Interest In
Operations Of
Consolidated Subsidiaries (26) - 18 95
Company's Share In Net
Income (Loss) Of
Investees 1 240 - 240
Taxes On Income (2,981) 803 (6,501) 205
Other income, net (33) - (10)
Non-recurring Expenses 1,905 - 1,445 -
Financial Expenses 25,425 6,814 14,273 4,255
Depreciation & Amortization 62,756 12,727 33,250 6,300
Adjusted EBITDA 128,062 33,938 64,989 17,847
For further information, please contact:
Lee Roth - KCSA Worldwide
lroth@kcsa.com
Tel: +1-212-896-1209
Mor Dagan - Investor Relations
mor@km-ir.co.il
Tel:+972-3-516-7620
Ms. Idit Azulay, Internet Gold
idita@co.smile.net.il
Tel: +972-3-939-9848
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTERNET GOLD-GOLDEN LINES LTD.
(Registrant)
By /s/Eli Holtzman
---------------
Eli Holtzman
Chief Executive Officer
Date: August 14, 2007