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 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 Q3 2008 Results dated November
12, 2008.
ITEM 1
Press Release Source: Internet Gold
Internet Gold Reports Q3 2008 Results
Wednesday November 12, 1:29 am ET
Record Results for 012 Smile.Communications; Smile.Media Returns to Breakeven
After Divesting MSN-Israel
PETACH TIKVA, Israel, November 12 /PRNewswire-FirstCall/ -- Internet Gold Golden
Lines Ltd., (NASDAQ Global Market and TASE: IGLD) today reported its financial
results for the third quarter ended September 30, 2008.
Highlights
- Revenues remain stable at NIS 294 million, adjusted EBITDA reaches NIS 80
million despite economic meltdown.
- High financial expenses attributable primarily to the increase in the
Israeli CPI to which the Group's bonds are linked and bond-related interest
expenses.
- 012 Smile.Communications delivers new records for revenues and operating
income (EBIT), together with strong net income.
- After MSN-Israel disposition, Smile.Media's continued activities return to
operational breakeven.
- Share buy-back program continues.
Financial Results for the Third Quarter
Revenues: Revenues for the third quarter of 2008 were NIS 293.8 million ($86.0
million), a 1.7% decrease compared year-over-year with NIS 298.9 million in the
third quarter of 2007, and a 4.4% increase compared sequentially with NIS 281.4
million in the second quarter of 2008. These revenues reflect the record results
delivered by 012 Smile.Communications.
Adjusted EBITDA: Adjusted EBITDA for the third quarter of 2008 was NIS 80.4
million ($23.5 million), a 28% increase compared year-over-year with NIS 62.9
million for the third quarter of 2007 and a 32% increase compared sequentially
with NIS 60.8 million for the second quarter of 2008. This reflects the strong
adjusted EBITDA recorded by Smile.Communications together with the one-time
impact of the MSN transaction.
For more information regarding the use of non-GAAP financial measures, please
see the notes in this press release.
Financing Expenses: Financing expenses for the third quarter were NIS 47.5
million ($13.9 million) compared with NIS 19.4 million in the third quarter of
2007 and NIS 32.6 million in the second quarter of 2008. This high level of
expenses reflects the effect of changes in the Israeli CPI and interest rates on
the Company's debt instruments. Specifically, the Company recorded NIS 20
million in CPI linkage expenses as a result of the quarter's 2.1% increase in
the Israeli CPI, to which certain of the Company's bonds are linked. This was a
non-cash financial expense that did not affect the Company's cash position.
Expenses associated with the interest due on the Company's bonds during the
third quarter totaled NIS 12.8 million ($3.74 million). In addition, some of the
Company's investments were downgraded due to the current global economic
uncertainty, obligating the Company, according to its conservative investment
policies, to realize them at current low prices. This resulted in a loss of NIS
11.7 million ($3.4 million) that was recorded in Financial Expenses.
Net Results: On a U.S. GAAP basis, the Company recorded a net loss for the third
quarter of 2008 of NIS (8.5) million ($2.5 million), or NIS (0.4) ($0.12) per
share. This compared to a net profit of NIS 3.9 million, or NIS 0.18 per share,
in the third quarter of 2007, and a net loss of NIS (8.1) million, or NIS (0.37)
per share, for the second quarter of 2008.
Balance Sheet
The Company's cash, cash equivalents and short term investments as of September
30, 2008 were NIS 673.0 million ($196.7 million), an increase of 37% compared
with NIS 492.1 million as of September 30, 2007. In addition, Internet Gold's
bank debt decreased by 72% from NIS 231 million as of September 30, 2007 to NIS
64 million ($18.7 million) as of the end of the third quarter of 2008.
As of September 30, 2008 the Company's primary balance sheet and operational
ratios showed significant improvement as compared to September 30, 2007:
As of September 30, 2008 2007
Ratio of Shareholders' Equity to Total Assets 18.5% *14%
Ratio of Net Debt to EBITDA 1.3 2.8
Adjusted EBITDA margin 27.0% 21.0%
Current Ratio (Current Assets divided by Current 2.03 1.68
Liabilities)
* Excluding NIS 85 million utilized in the buyback of the Company's shares.
Comments of Management
Commenting on the results, Eli Holtzman, Internet Gold's CEO, said, "We are
pleased to report steady progress and stable results for both of our operating
segments, especially given the poor economic climate. Our communications segment
achieved record revenues and operating profits during the quarter, demonstrating
the resilience of a business that provides vital services to nearly a million
customers, and we are pleased to have returned our media segment to operational
breakeven, giving us more flexibility in charting its future strategy. As an
expression of confidence in Internet Gold's long term prospects and a desire to
enhance shareholder value, we continue with our buy-back of both shares and
convertible bonds."
Mr. Holtzman continued, "Regarding our M&A efforts, we always have been
conservative and patient in seeking out the right investments, and, given the
current market environment, have become even more so. This approach led to the
success of our investment in 012 Golden Lines two years ago- a transaction and
process which took our Group to a whole new level - and continues to serve us
well. In the meantime, we continue to manage our existing holdings closely and
to maintain steady control of our expenses."
Business Segments
012 Smile.Communications Ltd. (NASDAQ and TASE: SMLC): 012 Smile.Communications
achieved record revenues and operating profit (EBIT) together with strong net
income for the third quarter, demonstrating the steadiness of its business
despite an economic slowdown. Revenues for the third quarter were NIS 282
million ($82 million), a 1% increase as compared year-over-year with NIS 280
million for the third quarter of 2007, and a 7% increase compared sequentially
with the second quarter of 2008. This increase reflected a 14% increase in
revenues from the Company's broadband services, which compensated for the 35%
year-over-year decrease in low-margin hubbing services (wholesale international
traffic) and the decrease in the average shekel-dollar exchange rate, which
declined by 16% compared to the average rate prevailing in Q3 2007. Excluding
the effect of the decrease in the shekel-dollar exchange rate and the reduction
in the Company's hubbing revenues, compared to the third quarter of 2007,
revenues increased by 12% on a year-over-year basis.
The subsidiary's adjusted EBITDA for the third quarter was NIS 63 million ($18.4
million), a 2% increase compared year-over-year with the third quarter of 2007,
and virtually unchanged as compared with the second quarter of 2008. Adjusted
EBITDA margin increased to 22.2% from 21.9% in the parallel period of 2007.
Smile.Media Ltd.: Smile.Media returned to operational breakeven during the third
quarter and recorded NIS 12.8 million in Other Income associated with the
transfer of its MSN-Israel activities to Microsoft Corporation. The segment's
revenues for the third quarter were NIS 13.0 million (US $3.8 million) and its
adjusted EBITDA for the quarter (including one-time net income) was NIS 19.4
million ($5.6 million).
Other: During the third quarter, Internet Gold incurred operating expenses of
approximately NIS 1.5 million (US $0.44 million). These expenses were primarily
for the continued investigation of potential joint venture and M&A
opportunities, 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.
Buyback Programs
- Share Buyback Program: During the third quarter, the Company's Board of
Directors approved an increase to the Company's share buyback program,
authorizing the repurchase of up to an additional NIS 70 million
(approximately U.S. $20.5 million) of the Company's ordinary shares. This
program was undertaken after having completed the repurchase of NIS 68
million in ordinary shares in fulfillment of the program announced on
November 29, 2007. The total shares repurchased through both programs as of
September 30, 2008 reached 2,639,925 shares, bringing the number of total
outstanding shares to 20,878,481 shares as of September 30, 2008. From
October 1, 2008 to date, the total number of additional shares repurchased
has reached 3,451,629 shares, bringing the total number of outstanding
shares to 20,066,777 as of today.
- Convertible Bond Buyback Program: During the third quarter, the Company
invested NIS 0.5 million ($0.15 million) in the repurchase of its
convertible bonds, bringing the total value of convertible bonds repurchased
since the initiation of the program on January 28, 2008 to NIS 9.2 million
par value. As a result of conversions of the convertible bonds, our
repurchase program and our redemption of 12.5% of these bonds, NIS 93.6
million par value of the bonds remain outstanding out of an original
issuance of NIS 220 million.
Conference Call Information
Management will host an interactive teleconference to discuss the results today,
November 12, 2008, at 10:00 a.m. EST (17:00 Israel time). To participate, please
call one of the following access numbers several minutes before the call begins:
1-888-281-1167 from within the U.S. or 1-866-9586-867 from within Canada,
0-800-4048-418 from within the U.K., or +972-3-918-0687 from other international
locations. The call will also be broadcast live through the company's Website,
http://www.igld.com, and will be available there for replay during the next 30
days.
NOTE A: Convenience Translation to Dollars
For the convenience of the reader, the reported NIS figures of September 30,
2008 have been presented in thousands of U.S. dollars, translated at the
representative rate of exchange as of September 30, 2008 (NIS 3.4210 = U.S.
Dollar 1.00). The U.S. Dollar ($) 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
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, depreciation expenses associated with, fixed assets (affecting relative
depreciation expense) and expenses recorded for stock compensation in accordance
with SFAS 123(R). 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 press release, may not be
comparable to similarly titled measures reported by other companies due to
differences in the way that these measures are calculated.
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
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
3.421
September 30 December 31 September 30
2008 2007 2008
(Unaudited) (Audited) (Unaudited)
NIS thousands $ thousands
Current assets
Cash and cash equivalents 116,527 601,926 34,061
Short-term investment 556,434 162,884 162,652
Trade receivables, net 216,578 224,616 63,310
Other receivables 26,551 26,446 7,761
Deferred taxes 8,472 9,707 2,476
Total current assets 924,562 1,025,579 270,260
Investments
Long-term trade receivables 3,700 3,460 1,082
Deferred taxes 34 192 10
Assets held for employee 21,455 20,639 6,272
severance benefits
Investments in investee companies 91 291 27
25,280 24,582 7,391
Property and equipment, net 165,562 163,949 48,396
Other assets, net 484,062 519,865 141,497
Goodwill 417,423 417,608 122,018
Total assets 2,016,889 2,151,583 589,562
Consolidated Balance Sheets (cont'd)
Convenience
translation
into
U.S. dollars
$1 = NIS
3.421
September 30 December 31 September 30
2008 2007 2008
(Unaudited) (Audited) (Unaudited)
NIS thousands $ thousands
Current liabilities
Short-term bank credit 50,164 77,998 14,664
Current maturities of long-term obligations 10,084 10,734 2,948
Accounts payable 195,187 209,626 57,056
Current maturities of convertible 14,898 15,354 4,355
debentures
Current maturities of debentures 95,279 - 27,851
Other current liabilities 89,012 91,131 26,019
Total current liabilities 454,624 404,843 132,893
Long term liabilities
Long-term loans and other long-term 4,224 32,265 1,235
obligations
Liability for termination of employer- 35,264 35,918 10,308
employee relations
Deferred taxes 46,680 59,104 13,645
Debentures 832,740 848,616 243,420
Convertible debentures 86,640 104,640 25,326
Total long term liabilities 1,005,548 1,080,543 293,934
Total liabilities 1,460,172 1,485,386 426,827
Minority interest 184,403 180,410 53,903
Shareholders' equity 372,314 485,787 108,832
Total liabilities and shareholders' equity 2,016,889 2,151,583 589,562
Consolidated Statements of Operations
Convenience
translation
into
dollars
$1 = NIS
3.421
Nine-month
period
Three-month Nine-month ended
period ended period ended September
September 30 September 30 30
2008 2007 2008 2007 2008
(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
NIS thousands NIS thousands $ thousands
Revenues 293,846 298,885 854,901 891,447 249,897
Costs and expenses
Cost of revenues 204,620 202,164 583,182 608,776 170,471
Selling and
marketing
expenses 43,446 44,967 125,996 133,382 36,830
General and
administrative
expenses 16,800 17,858 53,644 50,373 15,681
Impairment and other - 3,073 6,922 4,978 2,023
charges
Other income (12,791) - (12,791) - (3,739)
Total costs and 252,075 268,062 756,953 797,509 221,266
expenses
Income from 41,771 30,823 97,948 93,938 28,631
operations
Financial expenses, 47,533 19,413 102,604 44,633 29,992
net
Income (loss) before
tax
expenses (5,762) 11,410 (4,656) 49,305 (1,361)
Tax expenses (815) 7,243 4,707 4,264 1,376
(income)
Income (loss) after
tax
expenses (4,947) 4,167 (9,363) 45,041 (2,737)
Minority interest
(loss) in
operations of
consolidated
subsidiaries 3,506 189 6,553 163 1,916
Net income (loss) (8,453) 3,978 (15,916) 44,878 (4,653)
Income (loss) per
share, basic
Net income (loss)
per share
(in NIS) (0.40) 0.18 (0.72) 2.13 (0.21)
Weighted average
number
of shares
outstanding
(in thousands) 21,191 22,130 21,986 21,027 21,986
Income (loss) per
share, diluted
Net income (loss)
per share
(in NIS) (0.40) 0.17 (0.72) 2.10 (0.21)
Weighted average
number
of shares
outstanding
(in thousands) 21,191 22,351 21,986 21,378 21,986
Reconciliation Table of Non-GAAP Measures (NIS in thousands)
Convenience
translation
into
dollars
$1 = NIS
3.421
Nine-month
period
Three-month Nine-month ended
period ended period ended September
September 30 September 30 30
2008 2007 2008 2007 2008
(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
NIS thousands NIS thousands $ thousands
GAAP operating 41,771 30,823 97,948 93,938 28,631
income
Adjustments
Amortization of
acquired
intangible assets 6,820 7,983 20,460 23,952 5,981
Impairment and other - 3,073 6,922 4,978 2,023
charges
Other income (12,791) - (12,791) - (3,739)
Other income in
respect
of MSN transaction 12,791 - 12,791 - 3,739
Stock compensation
in
accordance with SFAS 1,239 - 2,189 - 640
123(R)
Non-GAAP adjusted
operating income 49,830 41,879 127,519 122,868 37,275
GAAP tax expenses
(income), net (815) 7,243 4,707 4,262 1,376
Adjustments
Amortization of
acquired
intangible assets
Included in tax 1,841 2,316 5,523 5,970 1,615
expenses, net
Non-GAAP tax 1,026 9,559 10,230 10,232 2,991
expenses, net
Net income (loss) as (8,453) 3,978 (15,916) 44,878 (4,653)
reported
Minority interest
(loss) in operations of
consolidated
subsidiaries 3,506 189 6,553 163 1,916
Tax expenses (815) 7,243 4,707 4,262 1,376
(income)
Impairment and other - 3,073 6,922 4,978 2,023
charges
Other income (12,791) - (12,791) - (3,739)
Other income in
respect
of MSN transaction 12,791 - 12,791 - 3,739
Stock compensation
in
accordance with SFAS 1,239 - 2,189 - 640
123(R)
Financial expenses, 47,533 19,413 102,604 44,633 29,992
net
Depreciation and 37,404 28,948 94,398 91,704 27,594
amortization
Adjusted EBITDA 80,414 62,844 201,457 190,618 58,888
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: +972-200-3848
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 12, 2008