B Communications Reports Financial Results For The Third Quarter of 2012

November 8, 2012

 

B Communications Reports Financial Results For The Third Quarter of 2012

 

–          Progress In Line With Our Strategic Plan Driven By Bezeq’s Continued Strong Cash Generation – 

 

 

Ramat Gan, Israel – November 8, 2012 – B Communications Ltd. (NASDAQ Global Market and TASE: BCOM) today reported its financial results for the third quarter ended September 30, 2012.

Bezeq’s Results: For the third quarter of 2012, the Bezeq Group reported revenues of NIS 2.5 billion ($ 638 million) and operating profit of NIS 667 million ($ 171 million). Bezeq’s EBITDA for the third quarter totaled NIS 1 billion ($ 262 million), representing an EBITDA margin of 41%. Net income for the period attributable to the shareholders of Bezeq totaled NIS 342 million ($ 87 million). Bezeq’s cash flow from operating activities totaled NIS 1 billion ($ 262 million) during the third quarter of 2012.

Dividend from Bezeq: On October 10, 2012, B Communications received two dividend payments from Bezeq which together totaled NIS 464 million ($ 119 million). These dividend payments included a current dividend of NIS 309 million ($ 79 million), representing B Communications’ share of Bezeq’s net profit for the first half of 2012, and a special dividend of NIS 155 million ($ 40 million), representing B Communications’ share of the fourth installment of six special dividend payments declared by Bezeq and approved by its shareholders last year.

Cash Position: As of September 30, 2012, B Communications’ unconsolidated cash and cash equivalents (including dividend receivable) totaled NIS 853 million ($ 218 million), its unconsolidated total debt was NIS 4.2 billion ($ 1.1 billion), and its net debt totaled NIS 3.3 billion ($ 849 million).

B Communications’ Unconsolidated Balance Sheet Data*

 

  September 30, December 31, September 30, December 31,
  2012  2011  2012  2011 
  (NIS millions) ($ millions)
Short term liabilities 470 526 120 134
Long term liabilities 3,705 3,874 947 991
Total liabilities 4,175 4,400 1,067 1,125
Cash and cash equivalents 389 354 99 91
Dividend receivable 464 119
Total net debt 3,322 4,046 849 1,034
         

 

 

* Does not include the balance sheet of Bezeq.


 

B Communications’ Third Quarter Consolidated Financial Results

 

B Communications’ revenues for the third quarter of 2012 were NIS 2,494 million ($ 638 million), a 15% decrease compared with NIS 2,917 million ($ 746 million) reported in the third quarter of 2011. For both the current and the prior-year periods, B Communications’ revenues consisted entirely of its share of Bezeq’s revenues.

B Communications’ net loss attributable to shareholders for the third quarter totaled NIS 55 million ($ 14 million), compared to NIS 31 million ($ 8 million) reported in the third quarter of 2011. This reflects the impact of two significant expenses:

  • Amortization of tangible and identifiable intangible assets resulting from the Bezeq acquisition: According to the rules of business combination accounting, the total purchase price of the Bezeq acquisition was allocated to Bezeq’s tangible and identifiable intangible assets based on their estimated fair values as determined by an analysis performed by an independent valuation firm. B Communications is amortizing certain of the acquired identifiable intangible assets in accordance with the economic benefit expected from such assets using an accelerated method of amortization.

 

During the third quarter of 2012, B Communications recorded amortization expenses related to the Bezeq purchase price allocation (“Bezeq PPA”) of NIS 307 million ($78 million), net. From the Bezeq acquisition date (April 14, 2010) until the end of the reporting quarter, B Communications has amortized approximately 53% of the total Bezeq PPA. It expects to amortize an additional 5% in the fourth quarter of 2012.

 

The Company’s Bezeq PPA amortization expense is a non-cash expense that is subject to adjustment. If, for any reason, the Company finds it necessary or appropriate to make adjustments to amounts already expensed, it may result in significant changes to future financial statements.

  • Financial expenses: B Communications’ unconsolidated financial expenses for the third quarter totaled NIS 65 million ($ 17 million). These expenses consisted primarily of NIS 64 million ($ 16 million) of interest and CPI linkage expense on the long-term loans incurred to finance the Bezeq acquisition and NIS 14 million ($ 4 million) of expenses related to the Company’s debentures. These expenses were offset by financial income of NIS 13 million ($ 3 million) generated by our short term investments. The significant financial expenses recorded in the third quarter were due primarily to high CPI linkage expenses attributed to the 0.85% increase in the Israeli CPI, to which approximately half of B Communications’ total debt is linked.

 

B Communications’ Unconsolidated Financial Results

 

  Quarter ended September 30, Quarter ended September 30,
  2012 2011 2012 2011
  (NIS millions) (US$ millions)
Revenues
Financial expenses (65) (93) (17) (24)
Other expenses (1) (2)
PPA amortization, net (95) (107) (24) (27)
Interest in Bezeq’s net income 106  171  27 43
Net loss (55) (31) (14) (8)

 


 

Comments of Management

 

Commenting on the results, Doron Turgeman, CEO of B Communications’ said, “The third quarter of 2012 was another stable period for Bezeq, demonstrating the cash flow-generating power of its formidable position in Israel’s telecommunications market. Due to the continued uninterrupted payment of both regular and special dividends, including the latest installment which we received last month, we have succeeded in building our cash reserves to their current strong level, and are on track with plans to continue expanding our financial stability and liquidity in the quarters to come. Despite current conditions in the Israeli capital market, as a long-term communications player with loans that are not burdened by share price-related covenants, we are able to manage our cash position entirely according to plan, relying upon steady and visible cash flow to fulfill all loan commitments while continuing to accelerate our repayments.”

 

          Bezeq Group Results (Consolidated) 

 

To provide further insight into its results, the Company has provided the following summary of the consolidated financial report of the Bezeq Group’s quarter ended September 30, 2012. For a full discussion of Bezeq’s results for the quarter, please refer to http://ir.bezeq.co.il.

Revenues of the Bezeq Group in the third quarter of 2012 amounted to NIS 2.49 billion compared with NIS 2.92 billion in the corresponding quarter of 2011, a decrease of 14.5%. Most of the decrease in the Bezeq Group’s revenues was due to lower revenues from the sale of cellular handsets and the erosion of revenues from cellular services.

Operating profit of the Bezeq Group in the third quarter of 2012 amounted to NIS 667 million, compared with NIS 944 million in the corresponding quarter of 2011, a decrease of 29.3%. Earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter of 2012 amounted to NIS 1.03 billion (EBITDA margin of 41.1%), compared with NIS 1.30 billion (EBITDA margin of 44.6%) in the corresponding quarter of 2011, a decrease of 21.1%. Net profit attributable to Bezeq shareholders in the third quarter of 2012 amounted to NIS 342 million compared with NIS 550 million in the corresponding quarter of 2011, a decrease of 37.8%. The decrease in profitability metrics was primarily due to a decrease in profitability in the cellular segment as well as lower capital gains from real estate and copper sales in the Fixed-line segment compared to the corresponding quarter of 2011.

Cash flow from operating activities in the third quarter of 2012 amounted to NIS 1.02 billion compared with NIS 882 million in the corresponding quarter of 2011, an increase of 16.1% mainly due to improved working capital in the cellular segment.  Free cash flow in the third quarter of 2012 amounted to NIS 754 million compared with NIS 508 million in the corresponding quarter of 2011, an increase of 48.4%. The increase in free cash flow was due to an increase in cash flow from operating activities as well as the completion of large infrastructure projects initiated in prior years.

Gross capital expenditures (CAPEX), in the third quarter of 2012 amounted to NIS 346 million compared with NIS 437 million in the corresponding quarter of 2011, a decrease of 20.8%. The Bezeq Group’s CAPEX to consolidated sales ratio in the third quarter of 2012 was 13.9%, compared with 15.0% in the corresponding quarter of 2011.

As of September 30, 2012, gross financial debt of the Bezeq Group was NIS 8.94 billion, compared with NIS 9.61 billion as of September 30, 2011. The net financial debt of the Bezeq Group was NIS 7.19 billion compared with NIS 5.99 billion as of September 30, 2011. At the end of September 2012, the Bezeq Group’s net financial debt to EBITDA ratio was 1.64, compared with 1.24 at the end of September 2011.

Notes:

 

  1. A.     Convenience Translation to Dollars: For the convenience of the reader, certain of the reported NIS figures of September 30, 2012 have been presented in millions of U.S. dollars, translated at the representative rate of exchange as of September 30, 2012 (NIS 3.912 = 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 our 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 Bezeq Group’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 B Communications Ltd.

B Communications is a telecommunications-oriented holding company and its primary holding is its controlling interest in Bezeq, The Israel Telecommunication Corp., Israel’s largest telecommunications provider (TASE: BZEQ). B Communications shares are traded on NASDAQ and the TASE under the symbol BCOM For more information please visit the following Internet sites:

www.bcommunications.co.il

www.ir.bezeq.co.il

www.eurocom.co.il

www.igld.com

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.

For further information, please contact:

Idit Cohen – IR Manager

idit@igld.com / Tel: +972-3-924-0000

 

Investor relations contacts:

Mor Dagan – Investor Relations

mor@km-ir.co.il / Tel: +972-3-516-7620

B Communications Ltd.

Consolidated Statement of Financial Position

(In millions)

    Convenience    
    translation into    
    U.S. dollars    
  September 30 September 30 September 30 December 31
  2012 2012 2011 2011
  (Unaudited) (Unaudited) (Unaudited) (Audited)
  NIS US$ NIS NIS

 

Assets        
Cash and cash equivalents           679      173  1,595  1,369
Investments including derivatives        1,456      372  2,411  1,284
Trade receivables        3,044      778  3,007  3,059
Other receivables           261        67  236  295
Inventory           149        38  199  204
Assets classified as held-for-sale           164        42  102  158
         
Total current assets 5,753 1,470  7,550  6,369
         
Investments including derivatives 94        24 115  119
Long-term trade and other receivables 1,193      305  1,594  1,499
Property, plant and equipment 6,811   1,741  7,392  7,143
Intangible assets 7,189   1,838  8,342  8,085
Deferred and other expenses 406      104  385  412
Investments in equity-accounted investee        
 (mainly loans) 984 251  1,031  1,059
Deferred tax assets 144 37  218  223
         
Total non-current assets 16,821 4,300  19,077  18,540
         
Total assets 22,574 5,770  26,627  24,909

 

B Communications Ltd.

 

Consolidated Statement of Financial Position (cont’d)

 

(In millions)

 

 

 

Convenience

 

 

 

 

translation into

 

 

 

 

U.S. dollars

 

 

 

September 30

September 30

September 30

December 31

 

2012

2012

2011

2011

 

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

 

NIS

US$

NIS

NIS

 

Liabilities

 

 

 

 

Short-term bank credit, current maturities of

 

 

 

 

 long-term liabilities and debentures

           934

 239

 1,442 

1,185

Trade payables

           772

 197

918 

892

Other payables  including derivatives

           741

 189

 997 

784

Dividend payable

        1,366

 349

1,542 

669

Current tax liabilities

           564

 144

521 

499

Deferred income

            60

 15

 52 

56

Provisions

           172

 44

 220 

186

Employee benefits

           288

74

 467 

389

Total current liabilities

4,897

1,251

 6,159 

4,660

 

 

 

 

 

Debentures

 5,043

 1,289

5,397 

5,403

Bank loans

 6,524

 1,668

 6,876 

6,753

Loans from institutions and others

 546

 140

548 

544

Dividend payable

 326

 83

 771 

636

Employee benefits

 228

 58

 271 

229

Other liabilities

 86

 22

 157 

186

Provisions

 71

 18

 70 

69

Deferred tax liabilities

 1,107

 283

 1,249 

1,426

Total non-current liabilities

13,931

3,561

 15,339 

15,246

 

 

 

 

 

Total liabilities

18,828

4,812

 21,498 

19,906

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

Total equity attributable to equity holders

 

 

 

 

 of the Company

833

213

 914 

 936 

Non-controlling interests

2,913

745

 4,215 

 4,067 

Total equity

3,746

958

 5,129 

5,003 

 

 

 

 

 

Total liabilities and equity

22,574

5,770

 26,627 

 24,909 

 

 

 

B Communications Ltd.

 

Consolidated Statements of Income

 

(In millions, except per share data)

 

 

Nine months period ended

Three months period ended

Year ended

 

September 30

September 30

December 31

 

 

Convenience

 

 

Convenience

 

 

 

 

translation

 

 

translation

 

 

 

 

into

 

 

into

 

 

 

 

U.S. dollars

 

 

U.S. dollars

 

 

 

2012

2012

2011

2012

2012

2011

2011

 

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

 

NIS

US$

NIS

NIS

US$

NIS

NIS

 

Revenues

7,829

2,001

 8,723 

2,494

638

 2,917 

11,373

 

 

 

 

 

 

 

 

Cost and expenses

 

 

 

 

 

 

 

Depreciation and amortization

 2,267

 579

 2,113 

 757

194

 715 

2,984

Salaries

 1,528

 391

 1,622 

 511

131

 549 

2,114

General and operating expenses

 3,015

 771

 3,447 

 963

246

 1,183 

4,462

Other operating expenses, net

 52

 13

 283 

 19

5

 1 

326

 

 

 

 

 

 

 

 

 

6,862

1,754

7,465 

2,250

576

2,448 

9,886

 

 

 

 

 

 

 

 

Operating income

967

247

 1,258 

244

62

 469 

1,487

 

 

 

 

 

 

 

 

Finance expenses, net

287

73

 401 

107

27

 162 

498

 

 

 

 

 

 

 

 

Income after financing

 

 

 

 

 

 

 

 expenses, net

680

174

 857 

137

35

 307 

989

 

 

 

 

 

 

 

 

Share in losses of

 

 

 

 

 

 

 

equity-accounted investee

233

60

 203 

93

24

 66 

216

 

 

 

 

 

 

 

 

Income before income tax

447

114

 654 

44

11

 241 

773

 

 

 

 

 

 

 

 

Income tax

279

71

 340 

75

19

 136 

653

 

 

 

 

 

 

 

 

Net income

168

43

 314 

(31)

(8)

 105 

120

 

 

 

 

 

 

 

 

Income (loss) attributable to:

 

 

 

 

 

 

 

  Owners of the Company

(105)

(27)

(98)

(55)

(14)

(31)

(219)

  Non-controlling interests

273

70

 412 

24

6

 136 

339

 

 

 

 

 

 

 

 

Net income

168

43

314 

(31)

(8)

105 

120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic

(3.53)

(0.90)

(3.39)

(1.84)

(0.47)

(1.10)

(7.34)

 

 

 

 

 

 

 

 

Net loss per share, diluted

(3.55)

(0.91)

(3.44)

(1.84)

(0.47)

(1.11)

(7.38)