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 February 2008
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 Q4 and Full Year 2007 Results
dated February 26, 2008.
ITEM 1
Press Release Source: Internet Gold
Internet Gold Reports Q4 and Full Year 2007 Results
Tuesday February 26, 1:56 am ET
2007 Results: Revenues Reach NIS 1.2 Billion, 21% Adjusted EBITDA,
14% Non-GAAP EBIT
Record Net Income of NIS 158 Million (Including One-Time Capital Gain)
Planned Growth in Next 2-3 Years Through Domestic and International Acquisitions
PETACH TIKVA, Israel, February 26 /PRNewswire-FirstCall/ -- Internet Gold Golden
Lines Ltd., (NASDAQ NMS and TASE: IGLD) today reported its financial results for
the fourth quarter and full year ended December 31, 2007.
Highlights
- Continued revenue growth and significant improvement in profitability: for the
quarter, revenues were NIS 286 million ($74.4 million), adjusted EBITDA margin
was 21%, non-GAAP EBIT margin was 14%, and net income was a record NIS 108
million ($28.1 million)
- Balance sheet strength: cash, cash equivalents and short term investments as
of the end of the year increased to NIS 763 million ($198 million).
Shareholders' Equity increased by 183%.
- $30 million capital gain: the IPO of 012 Smile.Communications gave IGLD a NIS
115 million ($30 million) capital gain, improving its capital structure
- Cash flow strength: operating cash flow for the year reaches ~NIS 225 million
($59 million)
- 012 Smile.Communications growing in line with plan: Q4 revenues from core
broadband businesses up by 14%; 33% gross margin; 23% adjusted EBITDA margin
Financial Results for the Fourth Quarter
Revenues for the fourth quarter of 2007 were NIS 286.0 million ($74.4 million),
a 147% increase compared with NIS 115.8 million for the fourth quarter of 2006,
and a 4% decrease compared with pro-forma sales of the fourth quarter of 2006.
Excluding wholesale international traffic revenues, which declined significantly
in 2007 due to Management's decision to reduce its emphasis on this low margin
business, the Company's revenues for the quarter increased by 8.1%.
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 2006 with Internet Gold's results for the same
period.
Net income for the fourth quarter of 2007 increased to NIS 108 million ($28.1
million), or NIS 4.63 ($1.20) per share, compared with NIS 6.0 million, or NIS
0.33 per share, for the fourth quarter of 2006. The increase was due to a
one-time capital gain of NIS 115 million ($30 million) related to the IPO of the
Company's subsidiary, 012 Smile.Communications, mitigated partially by tax
expense of NIS 16 million ($4.2 million) related primarily to former year tax
liabilities of 012 Smile.Communications. Adjusted EBITDA (b) for the quarter
reached NIS 60.4 million ($15.7 million), an 8% increase compared with the
adjusted pro-forma EBITDA(b) of the fourth quarter of 2006.
Financial Results for 2007
Revenues for the twelve months ended December 31, 2007 were NIS 1,177.0 million
($306.0 million), an increase of 188% compared with NIS 408.0 million in 2006.
On a pro-forma basis, 2007 revenues increased by 6.6% compared with NIS 1,104.0
million in 2006. Net income for 2007 increased to NIS 158 million ($41.1
million), or NIS 7.33 ($1.91) per share, compared with NIS 26.3 million, or NIS
1.43 per share, for 2006. Net income included a one-time capital gain of NIS 115
million ($30 million) related to the IPO of 012 Smile.Communications, and
non-recurring operating expenses of NIS 10.4 million ($2.7 million) related to
charges incurred in connection with the merger of Smile.Communications and 012
Golden Lines. Adjusted EBITDA(b) for the year reached NIS 246 million ($64.0
million), a 15% increase compared with the adjusted pro-forma EBITDA(b) for
2006.
For a detailed reconciliation of GAAP to non-GAAP financial information and for
more information regarding the use of non-GAAP financial measures, please see
the table titled "Reconciliation between GAAP and non-GAAP Statements of
Operations" as well as the notes contained in this press release.
Balance Sheet
The Company's cash, cash equivalents and short term investments as of December
31, 2007 were NIS 763 million ($198 million), an increase of 138% compared with
NIS 321 million at the end of 2006. In addition, Internet Gold's bank debt
decreased by 75% during the year, from NIS 381 million at the end of 2006 to NIS
96 million ($25 million) at the end of 2007. The Company's improved financial
condition resulted from 012 Smile.Communications' NIS 425 million debt offering
in the first quarter; the Company's NIS 423 million debt offering in the third
quarter; the NIS 308 million raised by 012 Smile.Communications in its IPO; ~
NIS 225 million in cash flow from operating activities generated during the
year; and NIS 104 million received from the exercise of warrants. In 2007, the
Company utilized NIS 585 million for the acquisition of 012 Golden Lines.
As of the end of 2007, the Company's primary balance sheet ratios showed
significant improvement as compared to 2006:
As of December 31, 2007 2006
Shareholders' Equity divided by Total Assets 25% 11%
Net Debt to EBITDA Ratio 1.2 3.3
Current Ratio (Current Assets divided by Current 2.8 0.5
liabilities)
Comments of Management
Commenting on the results, Eli Holtzman, Internet Gold's CEO, said, "2007 was a
transformational year during which we built Internet Gold into one of Israel's
major communications and Internet groups that is well-positioned for accelerated
growth. During the year, Management focused on the merger and IPO of 012
Smile.Communications, a process which tripled the Company's revenues, improved
its profitability and increased Shareholders' Equity by 183%, enhancing the
positioning of our group as we move into the next growth phase."
Mr. Holtzman continued, "We are very pleased with the performance of the entire
012 Smile team - particularly their success in continually growing core
businesses while carrying out the complex merger - and are confident in their
ability to deliver additional growth in the years ahead. In the coming quarters,
we will be focusing on the performance of Smile.Media, working to expand its
market share in Israel's rapidly-growing, but highly competitive marketplace. We
are re-working Smile.Media's strategic plan with the goal of realizing its full
potential."
Mr. Holtzman concluded, "In parallel, we have set the Company on a course aimed
at capitalizing on new opportunities over the next several years. In the
domestic market, we are evaluating potential acquisitions for their ability to
contribute to our results and to give us entry into adjacent business segments.
In the international arena, we have begun investigating potential partners in
several mid-to-large sized emerging markets, and are building our penetration
strategy. Our moves in this direction will be carefully charted and executed, a
process that will take time, but that we expect it to pay off handsomely over
the next few years."
Business Segments
012 Smile.Communications Ltd. (NASDAQ and TASE: SMLC): Revenues for the twelve
months ended December 31, 2007 were NIS 1,103 million ($286.8 million), an
increase of 221% compared with NIS 343.1 million in 2006. On a pro-forma basis,
2007 revenues increased by 6.3% compared with 2006. Revenues for the fourth
quarter of 2007 were NIS 271.3 million ($70.5 million), a slight decrease
compared with pro-forma revenues for the fourth quarter of 2006. However,
excluding the decline of wholesale international traffic sales, which management
elected to de-emphasize due to very low margins, revenues for the quarter
increased by 11%, reflecting a 14% increase in core broadband activities.
012 Smile.Communications' successful merger significantly improved its
profitability. Adjusted EBITDA(b) for 2007 increased by 24% to NIS 237.1 million
($61.6 million) compared with NIS 191.7 million in 2006 on a pro-forma basis.
Adjusted EBITDA(b) for the fourth quarter increased by 30% year-over-year
compared to pro-forma results, and adjusted EBITDA margin for the quarter rose
to 23%.
Smile.Media Ltd.: Revenues for the twelve months ended December 31, 2007 were
NIS 75 million (US$ 19.5 million), an increase of 12.6% compared with NIS 66.6
million in 2006. Revenues for the fourth quarter of 2007 were NIS 15.7 million
(US $4.1 million). Adjusted EBITDA(b) for the period was NIS 0.5 million. Q4
revenues and operating margins reflects a market share loss in several of the
e-Advertising business segments that Management is now working to reverse. Also
impacting the results were investments in technical platforms and applications
aimed to accelerate the segment's growth. Management is currently re-working
Smile.Media's strategic plan with the goal of building its market share and
realizing its full potential.
Other: In addition to the operations of 012 Smile.Communications and
Smile.Media, Internet Gold incurred operating expenses of approximately NIS 0.7
million (US $0.2 million) for the quarter. These expenses reflect activities
related to the Company's listing on public securities exchanges, including
Sarbanes Oxley compliance, Directors and Officers insurance and others, together
with expenses related to business development activities.
Changes in the Number of Outstanding Shares
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 ($10.40) per share until March
2008, at which time the conversion price will increase to NIS 50 ($13.00).
From the beginning of 2007 through October 15, 2007, all of the outstanding
warrants were exercised. The Company's proceeds from the exercise of warrants
totaled NIS 104 million ($27 million). As of December 31, 2007, bondholders
converted NIS 103.6 million of the bonds into 2,592,069 shares. Subsequent to
the balance sheet date, through February 20, 2008, an additional NIS 43,000 of
bonds was converted into 1,086 shares.
Share and Convertible Bond Buyback Programs Initiated
During the past several months, the Company's Board of Directors authorized
buyback plans in view of the current market price of the Company's shares and
convertible bonds, which it believes are far below the Company's true value and
its future growth prospects.
- Share Buyback Program: on November 29, 2007, the Board of Directors authorized
the repurchase of up to NIS 70 million (approximately $18.2 million) of the
Company's ordinary shares from both the Nasdaq Global Market and Tel Aviv Stock
Exchange. The timing and amount of any shares repurchased will be determined by
Management based on market conditions and other factors, including volume
limitations imposed by Rule 10b-18. As of December 31, 2007, the Company had
repurchased 144,138 shares, and as of February 20, 2008, the Company had
repurchased 658,469 shares.
- Convertible Bond Buyback Program: After the reporting period, on January 28,
2008, the Board of Directors authorized the repurchase of up to NIS 112 million
(approximately $29 million) of the Company's convertible bonds. As of February
20, 2008, the Company had repurchased convertible bonds valued at approximately
NIS 1.4 million.
Reconciliation Between Results on a GAAP and Non-GAAP Basis
Reconciliation between the Company's results on a GAAP and non-GAAP basis is
provided in a table immediately following the Consolidated Statement of
Operations (Non-GAAP Basis). Non-GAAP financial measures consist of GAAP
financial measures adjusted to exclude amortization of acquired intangible
assets, as well as certain business combination accounting entries. The purpose
of such adjustments is to give an indication of our performance exclusive of
non-cash charges and other items that are considered by management to be outside
of our core operating results. Our non-GAAP financial measures are not meant to
be considered in isolation or as a substitute for comparable GAAP measures, and
should be read only in conjunction with our consolidated financial statements
prepared in accordance with GAAP.
Our management regularly uses our supplemental non-GAAP financial measures
internally to understand, manage and evaluate our business and make operating
decisions. These non-GAAP measures are among the primary factors management uses
in planning for and forecasting future periods. We believe these non-GAAP
financial measures provide consistent and comparable measures to help investors
understand our current and future operating cash flow performance. These
non-GAAP financial measures may differ materially from the non-GAAP financial
measures used by other companies. Reconciliation between results on a GAAP and
non-GAAP basis is provided in a table immediately following the Consolidated
Statement of Operations.
Purchase Price Allocation
In the year ended 2007, the Company recorded NIS 32 million (US$ 8.3 million) in
amortization costs, relating to the acquisition of 012 Golden Lines, according
to the economic benefit expected from those intangible assets. In the three
months ended December 31, 2007, amortization costs were NIS 8 million (US$ 2.1
million).
NOTE A: Convenience Translation to Dollars
For the convenience of the reader, the reported NIS figures of December 31, 2007
have been presented in thousands of U.S. dollars, translated at the
representative rate of exchange as of December 31, 2007 (NIS 3.8460 = 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.
NOTE B: Non-GAAP Financial Measurements
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 72.4% owned 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
growing portfolio of Internet portals and e-Commerce sites.
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.
Consolidated Balance Sheets
Convenience
translation
into
U.S. dollars
$1=NIS 3.846
December 31 December 31
2007 2006 2007
(Unaudited) (Audited) (Unaudited)
NIS thousands NIS thousands $ thousands
Current assets
Cash and cash equivalents 601,926 320,479 156,507
Short-term investments 161,353 883 41,953
Trade receivables, net 221,602 220,734 57,619
Other receivables 26,947 26,489 7,006
Deferred taxes 8,003 2,393 2,081
Total current assets 1,019,831 570,978 265,166
Investments
Long-term trade receivables 3,460 2,951 900
Deferred taxes 20,534 157 5,339
Investments in investee companies 291 552 76
24,285 3,660 6,315
Property and equipment, net 163,949 159,692 42,628
Goodwill, other assets and deferred 941,266 949,267 244,739
charges
Total assets 2,149,331 1,683,597 558,848
Consolidated Balance Sheets (cont'd)
Convenience
translation
into
U.S. dollars
$1=NIS 3.846
December 31 December 31
2007 2006 2007
(Unaudited) (Audited) (Unaudited)
NIS thousands NIS thousands $ thousands
Current liabilities
Short-term bank credit 46,091 364,862 11,984
Current maturities of long- term 10,735 18,674 2,791
obligations
Accounts payable 200,069 193,144 52,020
Payables in respect of 012 - 584,621 -
acquisition
Current maturities of convertible 15,354 - 3,992
debentures
Other current liabilities 93,317 46,224 24,264
Total current liabilities 365,566 1,207,525 95,051
Long-term liabilities
Long-term loans and other long-term 66,485 20,386 17,287
obligations
Liability for termination of
employer-employee
relations, net 15,220 14,844 3,957
Deferred taxes 41,526 51,512 10,797
Debentures 839,434 - 218,262
Convertible debentures 97,375 198,998 25,319
Total long-term liabilities 1,060,040 285,740 275,622
Total liabilities 1,425,606 1,493,265 370,673
Minority interest 184,998 89 48,101
Shareholders' equity 538,727 190,243 140,074
Total liabilities and shareholders' 2,149,331 1,683,597 558,848
equity
Consolidated Statements of Operations
Convenience
translation
into
U.S. dollars
$1=NIS 3.846
Year ended
Year ended December 31 December 31
2007 2006 2005 2007
(Unaudited) (Audited) (Audited)(Unaudited)
NIS thousands $thousands
Revenues 1,177,284 408,359 *288,770 306,106
Costs and expenses
Cost of revenues 800,795 252,413 *154,781 208,215
Selling and marketing 176,250 75,576 *71,935 45,827
General and administrative 69,777 33,957 33,156 18,143
Non - recurring expenses 10,433 12,813 - 2,712
Total costs and expenses 1,057,255 374,759 *259,872 274,897
Income from operations 120,029 33,600 28,898 31,209
Financial expenses, net 57,414 5,615 9,403 14,928
Other expenses (income), net 3,117 - (237) 811
Gain from issuance of shares in (115,387) - - (30,002)
subsidiary
Income before tax expenses 174,885 27,985 19,732 45,472
Tax expense (benefit) 14,934 1,286 1,451 3,883
Income after tax expenses 159,951 26,699 18,281 41,589
Company's share in net loss of
unconsolidated investee - (334) - -
Minority interest in operations
of
consolidated subsidiaries (1,465) (34) - (381)
Net income 158,486 26,331 18,281 41,208
Income (loss) per share, basic
Net income per share (in NIS) 7.33 1.43 0.99 1.91
Weighted average number of shares
outstanding (in thousands) 21,617 18,438 18,432 21,617
Income (loss) per share, diluted
Net income per share (in NIS) 6.82 1.43 0.99 1.77
Weighted average number of shares
outstanding (in thousands) 24,795 18,438 18,432 24,795
Reconciliation Table of Non-GAAP Measures
Year ended December 31
2007 2006 2005
(Unaudited) (Unaudited) (Unaudited)
NIS thousands
GAAP operating income 120,029 33,600 28,898
Adjustments
Amortization of acquired
intangible assets 31,938 - -
Non-recurring expenses 10,433 12,813 -
Non-GAAP adjusted operating income 162,400 46,413 28,898
GAAP tax expenses 14,934 1,286 1,451
Adjustments
Amortization of acquired intangible
assets
Included in tax expenses, (benefit) 9,262 - -
Non-GAAP tax expenses 24,196 1,286 1,451
Net Income As Reported 158,486 26,331 18,281
Minority Interest In Operations Of
Consolidated Subsidiaries 1,465 34 -
Company's Share In Net Loss Of
Investees - 334 -
Taxes On Income 14,934 1,286 1,451
Gain from issuance of shares in
subsidiary (115,387) - -
Other (income)expenses, net 3,117 - (237)
Non-recurring Expenses 10,433 12,813 -
Financial Expenses, net 57,414 5,615 9,403
Depreciation & Amortization 115,648 31,178 27,630
Adjusted EBITDA 246,110 77,591 56,528
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: +972-200-3848
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: February 26, 2008