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 August 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 Q2 2008 Results dated August
13, 2008.
ITEM 1
Press Release Source: Internet Gold
Internet Gold Reports Q2 2008 Results
Wednesday August 13, 1:34 am ET
NIS 281 Million Revenues; NIS 61 Million Adjusted EBITDA(b)
PETACH TIKVA, Israel, August 13 /PRNewswire-FirstCall/ -- Internet Gold Golden
Lines Ltd., (NASDAQ NMS and TASE: IGLD) today reported its financial results for
the second quarter ended June 30, 2008.
Highlights
- Strong revenues and adjusted EBITDA despite the negative impact of the
shekel-dollar exchange rate and the decline in wholesale international
traffic (hubbing) revenues
- Strong cash-flow performance: operating cash-flow for the quarter reached
NIS 43 million ($12.8 million)
- 012 Smile.Communications delivers excellent performance in line with plan
for growth: adjusted EBITDA up 11% year-over-year; operating income (EBIT)
up 22% year-over-year; on-track growth of VOB domestic telephony
subscriber base; preparing to enter market for mobile services
- Smile.Media records a net loss due to MSN-Israel's reduced market share:
after the end of the quarter, an agreement was reached with Microsoft
which will improve the Company's cash position and profitability
- Additional share buy-back program put into place: after investing NIS 68
million in buying back shares since November 2007, the Board of Directors
has authorized the repurchase of an additional NIS 70 million of ordinary
shares in the open market
- Search underway for accretive M&A candidates
Financial Results for the Second Quarter
Revenues: Revenues for the second quarter of 2008 were NIS 281.4 million ($84.0
million) compared to NIS 296.3 million in the second 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 in the second quarter declined
by 19% compared year-over-year with the second 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 the emphasis on its
low-margin hubbing business resulted in a reduction of approximately NIS 17
million in second quarter revenues compared to the second quarter of 2007.
Excluding these two factors, the Company's revenues increased by approximately
8% on a year-over-year basis.
Adjusted EBITDA Adjusted EBITDA for the quarter was NIS 60.8 million ($18.1
million) compared with NIS 65.0 million for the second quarter of 2007. The
decline was caused by the negative contribution of Smile.Media's largest
Internet media property, MSN-Israel Ltd.
For more information regarding the use of non-GAAP financial measurements,
please see the notes in this press release.
Merger Related Expenses: During the second quarter, the Company recorded final
one-time expenses related to the merger of 012 Golden Lines and
Smile.Communications of NIS 1.9 million ($0.6 million), bringing the total of
all merger-related expenses under the original budget estimate of NIS 25-30
million.
Financing Expenses: Financing expenses for the second quarter were NIS 32.6
million ($9.7 million) compared with NIS 14.3 million in the second quarter of
2007. This high level of expenses was due primarily to the 6% decrease in the
average shekel-dollar exchange rate recorded during the quarter (as compared
with the exchange rate at March 31, 2008), which was responsible for the
majority of the NIS 14 million decrease in the shekel value of the Company's
dollar-denominated deposits, and was also due to CPI linkage expenses of NIS 22
million as a result of the quarter's 2.4% increase in the Israeli CPI, to which
the Company's bonds are linked. These non-cash financial expenses 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, the quarter's 2.4% increase
in the Israeli CPI and one-time merger-related expenses, the net loss for the
second quarter was NIS 8.1 million ($2.4 million), or NIS 0.37 ($0.11) loss per
share, compared to net profit of NIS 22.3 million, or NIS 1.05 per share, in the
second quarter of 2007. Excluding non-cash financial expenses described above
and one-time merger related expenses, earnings for the second quarter was NIS
16.4 million ($4.9 million), or NIS 0.75 ($0.22) per share.
Balance Sheet
The Company's cash, cash equivalents and short term investments as of June 30,
2008 were NIS 706.0 million ($210.6 million), an increase of 617% compared with
NIS 98.4 million ($29.3 million) as of June 30, 2007. In addition, Internet
Gold's bank debt decreased by 182% from NIS 237 million ($ 70.7 million) as of
June 30, 2007 to NIS 84 million ($25.0 million) as of the end of the second
quarter of 2008.
As of June 30, 2008 the Company's primary balance sheet and operational ratios
showed significant improvement as compared to June 30, 2007:
As of June 30, 2008 2007
Ratio of Shareholders' Equity to Total Assets* 20% *18%
Ratio of Net Debt to EBITDA 1.6 2.7
Adjusted EBITDA margin 22 22
Current Ratio (Current Assets divided by Current 2.0 0.7
Liabilities)
Gross Margin 32.4% 31.7%
* Excluding NIS 68 million invested in the buyback of the Company's shares.
On July 14, 2008, the Company announced that Midroog Ltd., an Israeli financial
rating company which is affiliated with Moody's, reissued the A1 rating
originally awarded to the Series A debentures issued in 2007 by 012
Smile.Communications. Midroog concluded that the A1 rating would continue if 012
Smile.Communications issues new debt of up to NIS 320 million (approximately $95
million). Copies of the complete Midroog report are available at
http://www.midroog.co.il.
Comments of Management
Commenting on the results, Eli Holtzman, Internet Gold's CEO, said, "Our results
reflect the excellent performance of our communications segment, representing
the vast majority of our current business. Consistent with its strategy for
long-term growth, during the second quarter, 012 Smile continued to build its
core businesses, to expand its base of VOB domestic telephony subscribers and to
move forward towards launching its mobile services nationwide. This steady
performance has enabled 012 Smile to re-earn an A-1 rating for its debentures, a
vote of confidence that will enhance its ability to carry out its strategy for
growth over the next few years."
Mr. Holtzman continued, "The market share losses of our primary Internet media
property, MSN-Israel, continued to impact the revenues and profitability of
Smile.Media, and therefore of the entire group. To resolve the situation, we
recently reached an agreement to have Microsoft independently operate the MSN
Israel portal from October 2008. This new agreement will result in a positive
addition to our cash position and improve our profitability, while having only a
minor impact on our revenues."
"As we have previously indicated, and in light of the recent changes in
Smile.Media's properties, we have intensified our search for appropriate
properties and joint ventures through which to deploy our significant cash
reserves and our expertise in the communications market place, both in Israel
and abroad. We are confident that, just as we succeeded in identifying 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. As a concrete expression of our optimism regarding Internet Gold's
future, our Board of Directors recently authorized the repurchase of up to NIS
70 million of our ordinary shares - in addition to the NIS 68 million that was
used since last November to purchase shares. Given the current level of our
share price, we strongly believe that the purchase of our own shares is an
appropriate use of our cash and that these purchases will enhance long-term
shareholder value."
Mr. Holtzman concluded, "Taken as a whole, we are optimistic about new
opportunities in our markets and believe that we are better positioned than ever
to go after them, taking our company to the next level. We look forward to
reporting our continued progress in the year ahead."
Business Segments
012 Smile.Communications Ltd. (NASDAQ and TASE: SMLC): Revenues for the second
quarter were NIS 264 million ($79 million) compared with NIS 275 million for the
second quarter of 2007, representing 94% of the Group's revenues. Revenues were
impacted by the continued 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 second quarter increased by 11% to a record NIS 63 million
($18.7 million) compared with NIS 57 million for the second quarter of 2007, and
its adjusted EBITDA margin for the quarter reached a record 24% compared with
21% in the second quarter of 2007.
Smile.Media Ltd.: Revenues for the second quarter were NIS 18.1 million (US $5.4
million), representing 6% of the Group's revenues. The segment recorded a
slightly negative adjusted EBITDAb for the quarter of NIS 0.2 million. The lower
revenues and operating results derived from the continued weak performance of
the subsidiary's primary MSN-Israel portal.
On July 6, 2008, the Company announced that it had reached an agreement with
Microsoft Corp. under which Microsoft will independently operate the MSN-Israel
portal beginning in October 2008. The parties are currently discussing the terms
of migration and possible future cooperation. The msn.co.il portal will continue
to operate throughout the transition period and both parties are working
together to support employees, advertisers and users. In 2007, MSN Israel
accounted for less than 3% of Internet Gold's total revenues.
Other: In addition to the operations of 012 Smile.Communications and
Smile.Media, during the second quarter, Internet Gold incurred operating
expenses of approximately NIS 1.4 million (US $0.4 million). These expenses were
primarily for the development of new joint ventures 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.
Share Buyback Programs
After the end of the second 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. $21 million) of the
Company's ordinary shares. This is the second repurchase program to be
authorized by the Company's Board of Directors and purchases will be made from
time to time in the open market on the NASDAQ Global Market and Tel Aviv Stock
Exchange. The timing and amount of any share purchases will be determined by the
Company's management based on its evaluation of market conditions and other
factors. The repurchase program may be suspended or discontinued at any time.
This new program is in addition to the program announced by Internet Gold on
November 29, 2007, when its Board of Directors authorized the repurchase of up
to NIS 70 million of the Company's ordinary shares. Management has substantially
completed the initial repurchase plan, having repurchased 1,978,476 ordinary
shares at a cost of NIS 68 million, bringing the total number of outstanding
shares to 21,539,930 as of June 30, 2008. To date, the Company has repurchased
2,271,276 shares, bringing the number of the total outstanding shares to
21,247,130.
Conference Call Information
Management will host an interactive teleconference to discuss the results today,
August 13, 2008, at 10:00 a.m. EDT (17:00 Israel time). To participate, please
call one of the following access numbers several minutes before the call begins:
1-888-281-1167 from within the U.S. or 1-888-604-5839 from within Canada,
0-800-917-9141 from within the U.K., or +972-3-918-0687 from other international
locations. The call will also be broadcast live through the company's Website,
http://www.igld.com, and will be available there for replay during the next 30
days.
NOTE A: Convenience Translation to Dollars
For the convenience of the reader, the reported NIS figures of June 30, 2008
have been presented in thousands of U.S. dollars, translated at the
representative rate of exchange as of June 30, 2008 (NIS 3.3520 = U.S. Dollar
1.00). The U.S. Dollar ($) 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. 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, non-recurring
expenses relating to charges incurred in connection with the merger of
Smile.Communications and 012 Golden Lines and expenses recorded for stock
compensation in accordance with SFAS 123(R).
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 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 = NIS3.352
June 30 December 31 June 30
2008 2007 2008
(Unaudited) (Audited) (Unaudited)
NIS thousands $ thousands
Current assets
Cash and cash equivalents 235,119 601,926 70,142
Short-term investments 470,915 162,884 140,488
Trade receivables, net 224,017 224,616 66,832
Other receivables 27,245 26,446 8,128
Deferred taxes 8,166 9,707 2,436
Total current assets 965,462 1,025,579 288,028
Investments
Long-term trade receivables 3,550 3,460 1,059
Deferred taxes 71 192 21
Assets held for employee 21,169 20,639 6,315
severance benefits
Investments in investee companies 291 291 87
25,081 24,582 7,482
Property and equipment, net 168,207 163,949 50,181
Other assets, net 501,821 519,865 149,708
Goodwill 417,608 417,608 124,585
Total assets 2,078,179 2,151,583 619,984
Consolidated Balance Sheets (cont'd)
Convenience
translation
into
U.S. dollars
$1 = NIS3.352
June 30 December 31 June 30
2008 2007 2008
(Unaudited) (Audited) (Unaudited)
NIS thousands $ thousands
Current liabilities
Short-term bank credit 71,505 77,998 21,332
Current maturities of
long-term obligations 10,277 10,734 3,066
Accounts payable 187,285 209,626 55,873
Current maturities of convertible 14,592 15,354 4,353
debentures
Current maturities of debentures 87,935 - 26,234
Other current liabilities 105,101 91,131 31,355
Total current liabilities 476,695 404,843 142,213
Long term liabilities
Long-term loans and other long-term 6,503 32,265 1,940
obligations
Liability for termination of employer- 35,497 35,918 10,590
employee relations
Deferred taxes 57,547 59,104 17,168
Debentures 816,028 848,616 243,445
Convertible debentures 85,231 104,640 25,427
Total long term liabilities 1,000,806 1,080,543 298,570
Total liabilities 1,477,501 1,485,386 440,783
Minority interest 183,719 180,410 54,809
Shareholders' equity 416,959 485,787 124,392
Total liabilities
and shareholders' equity 2,078,179 2,151,583 619,984
Consolidated Statements of Operations
Convenience
translation
into
dollars
$1 = NIS3.352
Six-month
Three months Six months period
period ended period ended ended
June 30 June 30 June 30
2008 2007 2008 2007 2008
(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
NIS thousands NIS thousands $ thousands
Revenues 281,423 296,310 561,055 592,562 167,379
Costs and expenses
Cost of revenues 190,240 202,501 378,562 406,612 112,936
Selling and
marketing expenses 40,473 45,624 82,550 88,415 24,627
General and
administrative 19,567 16,596 36,844 32,515 10,992
expenses
Impairment and other 2,062 1,445 6,922 1,905 2,065
charges
Total costs and 252,342 266,166 504,878 529,447 150,620
expenses
Income from 29,081 30,144 56,177 63,115 16,759
operations
Financial expenses, 32,606 14,303 55,071 25,220 16,429
net
Income (loss) before
tax expenses (3,525) 15,841 1,106 37,895 330
Tax expenses 3,090 (6,501) 5,522 (2,981) 1,647
(income)
Income (loss) after
tax expenses (6,615) 22,342 (4,416) 40,876 (1,317)
Minority interest
(loss) in
operations of
consolidated
subsidiaries 1,497 18 3,047 (26) 909
Net income (loss) (8,112) 22,324 (7,463) 40,902 (2,226)
Income (loss) per
share, basic
Net income (loss)
per share
(in NIS) (0.37) 1.05 (0.33) 2.0 (0.10)
Weighted average
number
of shares
outstanding
(in thousands) 21,845 21,178 22,388 20,463 22,388
Income (loss) per
share, diluted
Net income (loss)
per share
(in NIS) (0.37) 1.03 (0.33) 1.92 (0.10)
Weighted average
number
of shares
outstanding
(in thousands) 21,845 21,603 22,388 24,064 22,388
Reconciliation Table of Non-GAAP Measures (NIS in thousands)
Convenience
translation
into
dollars
$1 = NIS 3.352
Six-month
Three months Six months period
period ended period ended ended
June 30 June 30 June 30
2008 2007 2008 2007 2008
(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)
NIS thousands NIS thousands $ thousands
GAAP operating 29,081 30,144 56,177 63,115 16,759
income
Adjustments
Amortization of
acquired
intangible assets 6,820 10,264 13,640 15,969 4,069
Impairment and other 2,062 1,445 6,922 1,905 2,066
charges
Stock compensation
in
accordance with SFAS 950 - 950 - 283
123(R)
Non-GAAP adjusted
operating income 38,913 41,853 77,689 80,989 23,177
GAAP tax expenses
(income), net 3,090 (6,501) 5,522 (2,981) 1,647
Adjustments
Amortization of
acquired
intangible assets
Included in tax 1,841 2,315 3,683 4,631 1,099
expenses, net
Non-GAAP tax 4,931 (4,186) 9,205 1,650 2,746
expenses, net
Net income (loss) as (8,112) 22,324 (7,463) 40,902 (2,226)
reported
Minority interest
(loss) in operations of consolidated
subsidiaries 1,497 18 3,047 (26) 909
Tax expenses 3,090 (6,501) 5,522 (2,981) 1,647
(income)
Impairment and other 2,062 1,445 6,922 1,905 2,065
charges
Stock compensation
in
accordance with SFAS 950 - 950 - 283
123(R)
Financial expenses, 32,606 14,303 55,071 25,220 16,429
net
Depreciation and 28,673 33,400 56,994 62,932 17,003
amortization
Adjusted EBITDA 60,766 64,989 121,043 127,952 36,110
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
---------------
Name: Eli Holtzman
Title: Chief Executive Officer
Date: August 13, 2008