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 November 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 Q3 Results dated November 28,
2007.
ITEM 1
Press Release Source: Internet Gold
Internet Gold Reports Q3 Results
Wednesday November 28, 2:01 am ET
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 $ 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
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: +972-72-200-3848
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: November 28, 2007