Internet Gold Reports Financial Results for the Third Quarter of 2013

RAMAT GAN, Israel--(BUSINESS WIRE)--

Internet Gold – Golden Lines Ltd. (NASDAQ Global Market: IGLD)(TASE: IGLD) today reported its financial results for the third quarter ended September 30, 2013.

Bezeq's Results: For the third quarter of 2013, the Bezeq Group reported revenues of NIS 2.4 billion ($ 679 million) and operating profit of NIS 721 million ($ 204 million). Bezeq's EBITDA for the third quarter totaled NIS 1.05 billion ($ 297 million), representing an EBITDA margin of 44%. Net income for the period attributable to Bezeq's shareholders totaled NIS 449 million ($ 127 million). Bezeq's cash flow from operating activities during the period totaled NIS 1.1 billion ($ 323 million).

Cash Position: As of September 30, 2013, Internet Gold's unconsolidated cash and cash equivalents totaled NIS 279 million ($ 79 million), its unconsolidated gross debt was NIS 1.1 billion ($ 301 million) and its unconsolidated net debt was NIS 786 million ($ 222 million).

Internet Gold's Unconsolidated Balance Sheet Data*


In millions		Convenience
		translation into
		U.S. dollars
		(Note A)
	September 30,	September 30,	September 30,	December 31,
	2013	2013	2012	2012
	NIS	US$	NIS	NIS
Short term liabilities	144	41	147	138
Long term liabilities	921	260	1,023	895
Total liabilities	1,065	301	1,170	1,033
Cash and cash equivalents	279	79	312	179
Total net debt	786	222	858	854

* Does not include the balance sheet of B Communications.

Dividend from Bezeq: On September 15, 2013, Internet Gold's subsidiary, B Communications Ltd., received two dividend payments from Bezeq which together totaled NIS 455 million ($ 129 million). These dividend payments included a current dividend of NIS 300 million ($ 85 million), representing B Communications' share of Bezeq's net profit for the first half of 2013, and a special dividend of NIS 155 million ($ 44 million), representing B Communications' share of the sixth and last installment of the special dividend declared by Bezeq and approved by its shareholders in 2011.

Internet Gold's Third Quarter Financial Results

Internet Gold's consolidated revenues for the third quarter of 2013 were NIS 2.4 billion ($ 679 million), a 3.8% decrease compared with NIS 2.5 billion reported in the third quarter of 2012. For both the current and the prior-year periods, Internet Gold's consolidated revenues consisted entirely of Bezeq's revenues.

During the third quarter of 2013, B Communications recorded net amortization expenses related to its Bezeq purchase price allocation (“Bezeq PPA”) of NIS 198 million ($ 56 million) in its consolidated financial statements. From April 14, 2010, the date of the acquisition of its interest in Bezeq, until June 30, 2013, B Communications has amortized approximately 57% of the total Bezeq PPA. The Bezeq PPA amortization expense is a non-cash expense that is subject to adjustment. If, for any reason, B Communications finds it necessary or appropriate to make adjustments to amounts already expensed, it may result in significant changes to its audited financial reports, as well as to future financial statements.

Internet Gold's financial expenses, net: Internet Gold's unconsolidated net financial expenses for the third quarter of 2013 totaled NIS 41 million ($ 12 million) compared with NIS 17 million in the third quarter of 2012. These expenses included NIS 29 million ($ 8 million) in payments to holders of the Company's publicly-traded debentures, and a NIS 16 million ($ 3 million) non-cash expense related to the revaluation of Nurisha Holdings Ltd.'s option to purchase B Communications shares, which, in accordance with IAS 39, must be revalued each quarter until it vests in the second quarter of 2014. As non-cash items, any expense or income resulting from this revaluation do not affect the Company's cash-flow. In addition, financial expenses were impacted by the third quarter's 0.45% increase in inflation rates as compared to the third quarter of 2012, which increased payments due to the Company's bond holders.

These expenses were partially offset by financial income of NIS 4 million that resulted from the Company's marketable securities.

Internet Gold's net loss attributable to shareholders for the third quarter of 2013 was NIS 32 million ($ 9 million), a 48% improvement compared to a net loss of NIS 62 million in the third quarter of 2012.

Internet Gold's Unconsolidated Financial Results


In millions			Convenience
			translation into
			U.S. dollars
			(Note A)
	Three-month		Three-month		Three-month
	period ended		period ended		period ended		Year ended
	September 30,		September 30,		September 30,		December 31,
	2013		2013		2012		2012
	NIS		US$		NIS		NIS
Revenues	-		-		-		-
Financial expenses	(41	)	(12	)	(17	)	(60	)
Other expenses	(1	)	-		(1	)	(14	)
Interest in BCOM's net income (loss)	10		3		(44	)	37
Net income (loss)	32		9		(62	)	(37	)

Comments of Management

Commenting on the results, Doron Turgeman, CEO of Internet Gold said, “The third quarter was another period of progress according to our long-term work plan. With the goal of increasing our liquidity, during the quarter we sold a portion of our B Communications shares and now have a cash balance that is sufficient, according to the assumptions of our current work plan, to fully service our debt until 2015. In addition, the dividend distribution that B Communications has recently announced will further increase our liquidity. In general, we continue to be very pleased with all aspects of the Bezeq acquisition, which continues to generates a steady return that enhances our overall financial position and capabilities. We remain exceedingly confident regarding Bezeq's positioning in Israel's communications market and continue to seek out appropriate high-potential opportunities further afield."

Bezeq Group Results (Consolidated)

To provide further insight into its results, the Company is providing the following summary of the consolidated financial report of the Bezeq Group for the third quarter ended September 30, 2013. For a full discussion of Bezeq's results for the third quarter of 2013, please refer to its website: http://ir.bezeq.co.il.


Bezeq Group (consolidated)	Q3 2013	Q3 2012	% change
	(NIS millions)
Revenues	2,398	2,494	-3.8%
Operating profit	721	667	8.1%
EBITDA	1,050	1,026	2.3%
EBITDA margin	43.8%	41.1%
Net profit attributable to Company shareholders	449	342	31.3%
Diluted EPS (NIS)	0.16	0.13	23.1%
Cash flow from operating activities	1,143	1,024	11.6%
Payments for investments, net	267	270	-1.1%
Free cash flow ¹	876	754	16.2%
Net debt/EBITDA (end of period) ²	1.97	1.64

¹ Free cash flow is defined as cash flow from operating activities less net payments for investments.
² EBITDA in this calculation refers to the trailing twelve months.

Revenues of the Bezeq Group in the third quarter of 2013 amounted to NIS 2.40 billion ($ 679 million) compared with NIS 2.49 billion in the corresponding quarter of 2012, a decrease of 3.8%. The reduction in Bezeq Group revenues was primarily due to a decrease in cellular segment revenues. Nevertheless, the Bezeq Group results reflect a moderation in the quarter-over-quarter decrease in Pelephone's revenues, relative stability in the revenues of Bezeq Fixed-line and an increase in the revenues of Bezeq International.

The Bezeq Group's focused policy of initiating streamlining and efficiency measures in all segments, contributed to the increase in profitability metrics.

Operating profit of the Bezeq Group in the third quarter of 2013 amounted to NIS 721 million ($ 204 million) compared with NIS 667 million in the corresponding quarter of 2012, an increase of 8.1%.

Earnings before interest, taxes, depreciation and amortization (EBITDA) of the Bezeq Group in the third quarter of 2013 amounted to NIS 1.05 billion ($ 297 million) (EBITDA margin of 43.8%) compared with NIS 1.03 billion (EBITDA margin of 41.1%) in the corresponding quarter of 2012, an increase of 2.3%.

Net profit attributable to Bezeq shareholders amounted to NIS 449 million ($127 million) compared with NIS 342 million in the corresponding quarter of 2012, an increase of 31.3%.

The third quarter results again show record levels of operating cash flow and the second highest free cash flow in the last few years. Cash flow from operating activities of the Bezeq Group in the third quarter of 2013 amounted to NIS 1.14 billion ($ 323 million) compared with NIS 1.02 billion in the corresponding quarter of 2012, an increase of 11.6%. Free cash flow of the Bezeq Group in the third quarter of 2013 amounted to NIS 876 million ($ 248 million) compared with NIS 754 million in the corresponding quarter of 2012, an increase of 16.2%.

Net financial debt of the Bezeq Group was NIS 8.58 billion ($ 2.43 billion) at September 30, 2013 compared with NIS 7.19 billion as of September 30, 2012.

Notes:

A.		Convenience Translation to Dollars: For the convenience of the reader, certain of the reported NIS figures of September 30, 2013 have been presented in millions of U.S. dollars, translated at the representative rate of exchange as of September 30, 2013 (NIS 3.537 = 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.

B.		Use of non-IFRS Measurements: We and the Bezeq Group's management regularly use supplemental non-IFRS financial measures internally to understand, manage and evaluate its business and make operating decisions. We believe these non-IFRS financial measures provide consistent and comparable measures to help investors understand the Bezeq Group's current and future operating cash flow performance.

		These non-IFRS financial measures may differ materially from the non-IFRS financial measures used by other companies.

		EBITDA is a non-IFRS financial measure generally defined as earnings before interest, taxes, depreciation and amortization. The Bezeq Group defines EBITDA as net income before financial income (expenses), net, impairment and other charges, expenses recorded for stock compensation in accordance with IFRS 2, income tax expenses and depreciation and amortization. We present the Bezeq Group's 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, tax positions (such as the impact of changes in effective tax rates or net operating losses) and the age of, and depreciation expenses associated with, fixed assets (affecting relative depreciation expense).

		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 IFRS as a measure of profitability or liquidity. 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, 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.

		Reconciliation between the Bezeq Group's results on an IFRS and non-IFRS basis is provided in a table immediately following the Company's consolidated results. Non-IFRS financial measures consist of IFRS 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 the Bezeq Group's performance exclusive of non-cash charges and other items that are considered by management to be outside of its core operating results. The Bezeq Group's non-IFRS financial measures are not meant to be considered in isolation or as a substitute for comparable IFRS measures, and should be read only in conjunction with its consolidated financial statements prepared in accordance with IFRS.

About Internet Gold

Internet Gold is a telecommunications-oriented holding company which is a controlled subsidiary of Eurocom Communications Ltd. Internet Gold's primary holding is its controlling interest in B Communications Ltd. BCOMBCOM, which in turn holds the controlling interest in Bezeq, The Israel Telecommunication Corp., Israel's largest telecommunications provider BEZQ. Internet Gold's shares are traded on NASDAQ and the TASE under the symbol IGLD. For more information, please visit the following Internet sites:

www.igld.com
www.bcommunications.co.il
www.ir.bezeq.co.il

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 B Communications' 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.

Condensed Consolidated Statements of Financial Position as at
(In millions)

		Convenience
		translation into
		U.S. dollars
		(Note A)
	September 30	September 30	September 30	December 31
	2013	2013	2012	2012
	NIS	US$	NIS	NIS
Assets
Cash and cash equivalents	1,111	314	705	764
Investments, including derivative financial
instruments	1,783	504	1,743	1,655
Trade receivables, net	2,791	790	3,044	2,927
Other receivables	344	99	259	329
Inventory	122	34	149	123
Assets classified as held-for-sale	221	62	172	164

Total current assets	6,372	1,802	6,072	5,962

Investments, including derivative financial
instruments	90	25	94	90
Long-term trade and other receivables	700	198	1,193	1,074
Property, plant and equipment	6,584	1,862	6,811	6,911
Intangible assets	6,779	1,917	7,189	7,252
Deferred and other expenses	389	109	406	384
Investment in equity-accounted investee
(mainly loans)	1,000	283	984	1,005
Deferred tax assets	93	26	144	*128

Total non-current assets	15,635	4,420	16,821	16,844

Total assets	22,007	6,222	22,893	22,806

* Restated following the retrospective application of the amendment to IAS 19, Employee Benefits.

Internet Gold – Golden Lines Ltd.

Condensed Consolidated Statements of Financial Position as at (cont'd)
(In millions)

		Convenience
		translation into
		U.S. dollars
		(Note A)
	September 30	September 30	September 30	December 31
	2013	2013	2012	2012
	NIS	US$	NIS	NIS
Liabilities
Short-term bank credit, current maturities of long-term liabilities and debentures	1,609	455	1,057	1,707
Trade payables	630	178	770	793
Other payables, including derivative financial instruments	901	255	825	746
Dividend payable	-	-	1,366	669
Current tax liabilities	774	219	564	588
Provisions	124	35	172	145
Employee benefits	248	70	288	*251

Total current liabilities	4,286	1,212	5,042	4,899

Debentures	6,476	1,831	6,066	5,913
Bank loans	6,184	1,748	6,524	6,422
Loans from institutions and others	549	155	546	540
Dividend payable	-	-	326	-
Employee benefits	258	73	228	*260
Other liabilities	81	23	86	67
Provisions	67	19	71	66
Deferred tax liabilities	1,082	306	1,107	1,159

Total non-current liabilities	14,697	4,155	14,954	14,427

Total liabilities	18,983	5,367	19,996	19,326

Equity
Total equity attributable to equity holders of the Company	(89)	(25)	(185)	*(92)
Non-controlling interests	3,113	880	3,082	*3,572

Total equity	3,024	855	2,897	3,480

Total liabilities and equity	22,007	6,222	22,893	22,806

* Restated following the retrospective application of the amendment to IAS 19, Employee Benefits.

Internet Gold – Golden Lines Ltd.

Condensed Consolidated Statements of Income for the

(In millions, except per share data)

Nine months period ended

Three months period ended

Year ended

September 30

December 31

Convenience

translation

into

U.S. dollars

2013

2012

2013

2012

NIS

US$

NIS

US$

NIS

Revenues

7,154

2,023

7,829

2,398

678

2,494

10,278

Cost and expenses

Depreciation and amortization

1,508

426

2,267

527

149

757

2,367

Salaries

1,438

407

1,530

466

132

512

*1,980

General and operating expenses

2,610

738

3,016

890

251

964

3,997

Other operating (income) expenses, net

(30)

(8)

(1)

(1)

5,526

1,563

6,865

1,882

532

2,252

8,343

Operating income

1,628

460

964

516

146

242

1,935

Financing expenses, net

311

344

138

124

*415

Income after financing expenses, net

1,317

372

620

378

107

118

1,520

Share in losses of equity-accounted investee

195

233

245

Income before income tax

1,122

317

387

290

1,275

Income tax

428

121

279

143

*556

Net income (loss) for the period

694

196

108

147

(49)

719

Income (loss) attributable to:

Owners of the Company

(144)

(32)

(9)

(62)

*(37)

Non-controlling interests

676

191

252

179

*756

Net income (loss) for the period

694

196

108

147

(49)

719

Earnings per share

Net income (loss), basic

0.75

0.21

(7.52)

(1.68)

(0.47)

(3.24)

(1.97)

Net income (loss), diluted

0.70

0.20

(7.55)

(1.70)

(0.48)

(3.24)

(2.01)

* Restated following the retrospective application of the amendment to IAS 19, Employee Benefits.

Internet Gold – Golden Lines Ltd.

Reconciliation for NON-IFRS Measures

EBITDA

The following is a reconciliation of the Bezeq Group's operating income to EBITDA:

In millions

	Three months period ended
	September 30
		Convenience
		translation
		into
		U.S. dollars
		(Note A)
	2013	2013	2012
	NIS	US$	NIS

Operating income	721	204	667
Depreciation and amortization	329	93	359

EBITDA	1,050	297	1,026

Free Cash Flow

The following table shows the calculation of the Bezeq Group's free cash flow:

In millions

	Three months period ended
	September 30
		Convenience
		translation
		into
		U.S. dollars
		(Note A)
	2013	2013	2012
	NIS	US$	NIS

Cash flow from operating activities	1,143	323	1,024
Purchase of property, plant and equipment	(270)	(76)	(309)
Investment in intangible assets and deferred expenses	(50)	(14)	(58)
Proceeds from the sale of property, plant and equipment	53	15	97

Free cash flow	876	248	754

Internet Gold
Idit Cohen, IR Manager
+972-3-924-0000
idit@igld.com
or
Investor relations contact:
Mor Dagan, Investor Relations
+972-3-516-7620
mor@km-ir.co.il

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