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 May 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 Q1 2008 Results dated May 13,
2008.
ITEM 1
Press Release Source: Internet Gold
Internet Gold Reports Q1 2008 Results
Tuesday May 13, 2:37 am ET
NIS 280 Million Revenues; NIS 60.3 Million Adjusted EBITDA; 33% Gross Margin;
22% Adjusted EBITDA Margin PETACH TIKVA, Israel, May 13 /PRNewswire-FirstCall/
-- Internet Gold Golden Lines Ltd., (NASDAQ NMS and TASE: IGLD) today reported
its financial results for the first quarter ended March 31, 2008.
Highlights
- Strong gross profit and adjusted EBITDAb despite the negative impact of
the shekel-dollar exchange rate and the decline in hubbing revenues
- Improved cash flow from operations: operating cash flow for the quarter
reached NIS 48 million ($13.5 million)
- 012 Smile.Communications core operations growing in line with business
plan: adjusted EBITDAb up 7% year over year; on-track execution of VOB
domestic telephony and mobile strategies
- Acceleration of share buy-back program; as of May 10, 2008, the Company
had invested approximately $16 million in this program
- Continued focus on search for accretive M&A candidates
Financial Results for the First Quarter
Revenues: Revenues for the first quarter of 2008 were NIS 280.0 million ($78.8
million) compared to NIS 296.3 million in the first quarter of 2007. Revenues
for the quarter were impacted significantly by the decline in the shekel-dollar
exchange rate and 012 Smile.Communications' decision to reduce its hubbing
business. The average shekel-dollar exchange rate as of the end of the first
quarter declined by 14% compared year-over-year with the first quarter of 2007,
thus reducing the shekel value of dollar-linked service contracts which
represent approximately one third of the Company's revenues. In addition, 012
Smile.Communications' decision, during late 2007, to reduce emphasis on its
low-margin hubbing (wholesale international traffic) business reduced its first
quarter revenues by approximately NIS 18 million compared to the first quarter
of 2007. Excluding these two factors, the Company's revenues increased by
approximately 6% on a year-over-year basis.
Gross Margin: Despite the reduction in revenues, gross margin increased to 33%
from 31% in the first quarter of 2007, reflecting the synergies of the merger
carried out in 2007 and the reduction of hubbing revenues in 012
Smile.Communications' mix of sales.
Adjusted EBITDAb: Adjusted EBITDA for the quarter was NIS 60.3 million ($17.0
million) compared with NIS 62.8 million for the first quarter of 2007. However,
the Company's adjusted EBITDAb margin for the quarter strengthened slightly,
reaching 22.0% compared with 21.0% in the first quarter of 2007, reflecting the
improved gross margin.
For more information regarding the use of non-GAAP financial measurements,
please see the closing notes in this press release.
Merger-Related Expenses: One-time expenses related to the merger of 012 Golden
Lines and Smile.Communications were NIS 4.8 million ($1.4 million) in the first
quarter compared with NIS 0.5 million in the first quarter of 2007. The Company
expects that final merger-related expenses of up to NIS 2 million ($600,000)
will be recorded in the second quarter of 2008.
Financing Expenses: Financing expenses for the first quarter were NIS 22.5
million ($6.3 million) compared with NIS 11.0 million in the first quarter of
2007. This unusually high level of expenses was due primarily to this quarter's
8% decrease in the average shekel-dollar exchange rate (as compared with the
rate at December 31, 2007), which decreased the shekel value of the Company's
dollar-denominated deposits by approximately NIS 15 million. This was recorded
as a non-cash expense that did not affect the Company's cash position.
Net Results: On a U.S. GAAP basis, giving full effect to the decrease in the
shekel-dollar exchange rate on financing expenses and one-time merger-related
expenses, net income for the first quarter was NIS 1.0 million ($286,000), or
NIS 0.04 ($0.012) per share compared to NIS 18.3 million, or NIS 0.93 per share,
in the first quarter of 2007. Excluding the decrease in the shekel-dollar
exchange rate and one-time merger related expenses, non-GAAP earnings per share
for the quarter were approximately NIS 0.61 ($0.17).
Balance Sheet
The Company's cash, cash equivalents and short term investments as of March 31,
2008 were NIS 800.3 million ($225.2 million), an increase of 958% compared with
NIS 75.6 million ($ 21.3 million) as of March 31, 2007. In addition, Internet
Gold's bank debt decreased by 62% from NIS 414 million ($ 116.5 million) as of
March 31, 2007 to NIS 159 million ($44.8 million) as of the end of the first
quarter of 2008.
As of March 31, 2008 the Company's primary balance sheet and operational ratios
showed significant improvement as compared to March 31, 2007:
As of March 31, 2008 2007
Ratio of Shareholders' Equity to Total Assets 21% 17%
Ratio of Net Debt to EBITDA 1.4 3.1
Adjusted EBITDA margin 22 21
Current Ratio (Current Assets divided by Current 2 0.6
Liabilities)
Gross Margin 33% 31%
Comments of Management
Commenting on the results, Eli Holtzman, Internet Gold's CEO, said, "The first
quarter was a period of both successes and challenges for Internet Gold. Our 012
Smile.Communications subsidiary made important progress during the quarter,
delivering a record level of profitability from its core businesses while
continuing its expansion into Israel's domestic telephony market and taking
initial steps towards penetrating the domestic mobile market. In parallel,
Smile.Media's performance did not meet our expectations again in the first
quarter. We have recently initiated plans to boost revenues and cut costs, both
aimed at bringing the subsidiary back to operating profitability, while we
continue to evaluate longer term strategic alternatives.
"We continue to seek attractive M&A targets in both Israel and international
markets. Suitable candidates have to be of significant size, have operational
profitabalitiy, operate in a communications field that does not compete with our
current businesses and available at a reasonable valuation. The search process
is not simple and requires patience. However, we are confident that, just as we
succeeded to identify the right M&A target in the 012 transaction two years ago,
we will be successful in locating our next significant investment, thereby
taking our group to the next level. We believe these efforts will generate
significant returns and shareholders' value over the next two-to-three years.
With a firm belief that the current price level of our share is far below the
Company's value, we have accelerated our share buyback program, investing a
total of approximately $16.0 million in this effort, repurchasing 1,714,116
shares."
Business Segments
012 Smile.Communications Ltd. (NASDAQ and TASE: SMLC): Revenues for the first
quarter were NIS 263.4 million ($74.1 million) compared with NIS 276 million for
the first quarter of 2007. Revenues were impacted by the 14% year-over-year
decline in the average shekel-dollar exchange rate, which reduced the shekel
value of service contracts linked to the dollar, and Management's decision in
late 2007 to de-emphasize the low-margin hubbing business. Excluding these two
factors, 012 Smile.Communications' revenues from core activities increased by
approximately 10% on a year-over-year basis.
012 Smile.Communications' profitability continues to improve due to the
synergies realized from the merger and the reduction of the proportion in its
revenues that is derived from hubbing activities. The subsidiary's adjusted
EBITDAb for the first quarter increased by 7% to a record NIS 62 million ($17.4
million) compared with NIS 58 million for the first quarter of 2007, and its
adjusted EBITDA margin for the quarter reached a record 24.0% compared with
21.0% in the first quarter of 2007.
Smile.Media Ltd.: Revenues for the first quarter were NIS 16.9 million (US $4.8
million), with slightly positive adjusted EBITDAb. The lower revenues and
operating results reflect a weaker-than-expected market share of several of the
subsidiary's e-Advertising business segments, partially offset by a gain in
revenues from e-Commerce activities. Management has recently implemented a
revenue-boosting strategy in parallel with a cost-cutting plan aimed at assuring
Smile.Media's operating profitability, and is evaluating further strategic
alternatives.
Other: In addition to the operations of 012 Smile.Communications and
Smile.Media, during the quarter, Internet Gold incurred operating expenses of
approximately NIS 1.7 million (US $0.5 million), a substantial portion of which
is related to the Company's Sarbanes Oxley compliance program which is nearly
completed. Management believes that its Sarbanes Oxley-related expenses will be
significantly lower during the remainder of 2008.
Share and Convertible Bond Buyback Programs
During the first quarter, the Company's Board of Directors has accelerated its
ordinary share and convertible bond buyback programs in view of current market
prices, which, it believes, are far below the Company's true value and growth
prospects.
Share Buyback Program: on November 29, 2007, the Board of Directors authorized
the repurchase of up to NIS 70 million (approximately $19.7 million) of the
Company's ordinary shares in both the Nasdaq Global Market and Tel Aviv Stock
Exchange. Management has been executing the repurchase plan successfully,
repurchasing 1,334,245 shares as of the end of the first quarter of 2008,
bringing the total number of outstanding shares as of that date to 22,184,161.
To date, the company has repurchased 1,714,116 shares, bringing the number of
the total outstanding shares to 21,804,290.
Convertible Bond Buyback Program: On January 28, 2008, the Company's Board of
Directors authorized the repurchase of up to NIS 112 million (approximately
$31.5 million) of the Company's convertible bonds. The Company has repurchased
bonds valued at NIS 8,781,790 through the end of May 10, 2008, thus decreasing
the Company's current bond-related debt to NIS 94.1 million ($26.5 million).
Conference Call Information
Management will host an interactive teleconference to discuss the results today,
May 13, 2008, at 10:00 a.m. EDT. To participate, please call one of the
following access numbers several minutes before the call begins: 1-866-860-9642
from within the U.S. or 1-888-604-5839 from within Canada, 0-800-051-8913 from
within the U.K., or +972-3-918-0692 from other international locations. The call
will also be broadcast live through the company's Website, http://www.igld.com,
and will be available there for replay during the next 30 days.
NOTE A: Convenience Translation to Dollars
For the convenience of the reader, the reported NIS figures of March 31, 2008
have been presented in thousands of U.S. dollars, translated at the
representative rate of exchange as of March 31, 2008 (NIS 3.5530 = U.S. Dollar
1.00). The U.S. Dollar ($) 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.
Note C: 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.
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, the failure to manage growth and other risks detailed
from time to time in Company's 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.
Internet Gold - Golden Lines Ltd.
Consolidated Balance Sheets
Convenience
translation
into
U.S. dollars
$1 = NIS
3.553
March 31 March 31 March 31
2008 2007 2008
(Unaudited) (Unaudited) (Unaudited)
NIS thousands $ thousands
Current assets
Cash and cash equivalents 518,332 73,358 145,885
Short-term investments 282,013 2,245 79,373
Trade receivables, net 231,705 246,125 65,214
Other receivables 34,582 51,314 9,733
Deferred taxes 9,620 6,685 2,708
Total current assets 1,076,252 379,727 302,913
Investments
Long-term trade receivables 3,150 2,065 887
Deferred taxes 18,804 178 5,292
Assets held for employee 21,347 19,861 6,008
severance benefits
Investments in investee companies 200 200 56
43,501 22,304 12,243
Property and equipment, net 169,577 155,417 47,728
Goodwill and other assets net,
925,164 910,243 260,390
Total assets 2,214,494 1,467,691 623,274
Internet Gold - Golden Lines Ltd.
Consolidated Balance Sheets (cont'd)
Convenience
translation
into
U.S. dollars
$1 = NIS
3.553
March 31 March 31 March 31
2008 2007 2008
(Unaudited) (Unaudited) (Unaudited)
NIS thousands $ thousands
Current liabilities
Short-term bank credit 109,922 358,904 30,938
Current maturities of long-term
obligations 7,176 7,176 2,020
Accounts payable 203,597 209,397 57,302
Current maturities of debentures 94,878 - 26,704
Other current liabilities 112,090 59,035 31,549
Total current liabilities 527,663 634,512 148,513
Long term liabilities
Long-term loans and other long-term
obligations 43,675 53,995 12,292
Liability for employee severance
benefits 34,974 34,084 9,843
Deferred taxes 70,419 38,972 19,820
Debentures 792,893 271,721 223,161
Convertible debentures 99,432 177,110 27,985
Total long term liabilities 1,041,393 575,882 293,101
Total liabilities 1,569,056 1,210,394 441,614
Minority interest 183,923 1,565 51,766
Shareholders' equity 461,515 255,732 129,894
Total liabilities and shareholders'
equity 2,214,494 1,467,691 623,274
Internet Gold - Golden Lines Ltd.
Consolidated Statements of Operations
Convenience
translation
into
U.S. dollars
$1 = NIS
3.553
March 31 March 31 March 31
2008 2007 2008
(Unaudited) (Unaudited) (Unaudited)
NIS thousands $ thousands
Revenues 279,632 296,304 78,703
Costs and expenses
Cost of revenues 188,322 204,420 53,004
Selling and marketing expenses 42,077 42,685 11,843
General and administrative 17,308 15,921 4,871
expenses
Impairment and other charges 4,860 460 1,368
Total costs and expenses 252,567 263,486 71,086
Income from operations 27,065 32,818 7,617
Financial expenses, net 22,467 10,911 6,323
Income before tax expenses 4,598 21,907 1,294
Tax expenses 2,030 3,620 571
Income after tax expenses 2,568 18,287 723
Minority interest (loss) in
operations of consolidated
subsidiaries
1,551 (55) 437
Net income 1,017 18,342 286
Income per share, basic
Net income per share (in NIS) 0.04 0.93 0.01
Weighted average number of shares
outstanding (in thousands) 22,935 19,658 22,935
Income per share, diluted
Net income per share (in NIS) 0.04 0.74 0.01
Weighted average number of shares
outstanding (in thousands) 22,935 24,928 22,935
Internet Gold - Golden Lines Ltd.
Reconciliation Table of Non-GAAP Measures (NIS in thousands)
Convenience
translation
into
dollars
$1 = NIS
3.553
Three-month
period
ended
Three months period March 31
ended March 31
2008 2007 2008
(Unaudited) (Unaudited) (Unaudited)
NIS thousands $ thousands
GAAP operating income 27,065 32,818 7,617
Adjustments
Amortization of acquired
intangible assets 6,820 5,705 1,920
Impairment and other charges 4,860 460 1,368
38,745 38,983 10,905
Non-GAAP adjusted operating income
GAAP tax expenses, net 2,030 3,620 571
Adjustments
Amortization of acquired intangible
assets
Included in tax expenses, net 1,841 1,655 518
Non-GAAP tax expenses, net 3,871 5,275 1,089
Net income as reported 1,017 18,342 286
Minority interest (loss) in operations 1,551 (55) 437
of consolidated subsidiaries
Taxes on income 2,030 3,620 571
Impairment and other charges 4,860 460 1,368
Financial expenses, net 22,467 10,911 6,323
Depreciation and amortization 28,352 29,532 7,980
Adjusted EBITDA 60,277 62,810 16,965
For further information, please contact:
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: May 13, 2008