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012 Smile.Communications Reports Results: Third Quarter Revenues Reach NIS 294 Million PETACH TIKVA, Israel, November 18 /PRNewswire-FirstCall/ -- 012
Smile.Communications (NASDAQ Global Market and TASE: SMLC), an Israeli
telecommunications service provider, today reported financial results for the
three and nine month periods ended September 30, 2009.
Results for the Third Quarter
- Total revenues increased by 4% to NIS 294 million (US $78 million)
- Revenues from the Broadband segment increased by 6%
- Operating income increased by 11% to NIS 37 million (US $10 million)
- Net income increased by 19% to NIS 15 million (US $4 million) or
NIS 0.59 per share (US $0.16 per share)
- Total of 136,000 local telephony lines as of the end of the quarter
- Cash flow from operations for the quarter increased by 36% to NIS
64 million (US$17 million)
Revenues for the third quarter increased by 4% to NIS 294 million (US $78 million) compared with NIS 282 million for the parallel period of 2008. Revenues from broadband services increased by 6% to NIS 148 million (US $39 million) for the period compared with NIS 140 million for the third quarter of 2008. Revenues from traditional voice services totaled NIS 146 million (US $39 million) compared to NIS 142 million for the same period in 2008. Operating income for the third quarter increased by 11% to NIS 37 million (US $10 million) compared with NIS 34 million for the third quarter of 2008. Adjusted EBITDA for the third quarter increased by 11% to NIS 70 million (US $19 million) compared with NIS 63 million for the parallel period of 2008. For more information regarding the use of non-GAAP financial measures, please see the notes in this press release. Net income for the quarter increased by 19% to NIS 15 million (US $4 million), or NIS0.59 per fully diluted share, compared to NIS 13 million, or NIS 0.49 per fully diluted share, for the third quarter of 2008. The Company's net financial debt as of September 30, 2009 was NIS 145 million (US $39 million), a decrease of NIS 157 million from NIS 302 million as of the end of 2008. The reduction reflects the Company's ability to pay down its debt due to the positive cash flow it generated during the first nine months of 2009. Comments of Management Commenting on the results, Ms. Stella Handler, CEO of 012 Smile.Communications, said, "We are pleased to report another quarter of strong revenues and EBITDA, demonstrating the continued progress of our operating segments, both of which are focused on increased efficiency and growth. The combination of higher revenues and reduced operating expenses has enabled us to deliver a 278% increase in our net income for the nine-month period despite the strengthening of the shekel against the U.S. dollar, a macroeconomic factor that has increased our financing expenses significantly. In parallel, we have achieved the customer acquisition targets that we set for ourselves last year and are benefiting from a steady increase in our retention rates." Ms. Handler continued, "As previously announced, we recently entered into an agreement to acquire the controlling stake of Bezeq, The Israel Telecommunication Corp., Israel's largest telecommunications provider (TASE: BZEQ). In addition, as reported earlier this week, we signed an agreement with a wholly owned subsidiary of Ampal-American Israel Corporation (Nasdaq: AMPL - News) to sell 012 Smile.Communication's current ongoing business for NIS 1.2 billion, or approximately $318 million. This sale represents an important step in finalizing 012 Smile.Communication's agreement to acquire the controlling stake of Bezeq, which we expect to occur prior to April 25, 2010." Conference Call Information: Management will host an interactive teleconference to discuss the results today, November 18, 2009, at 09:00 a.m. EDT. To participate, please call one of the following access numbers several minutes before the call begins: 1-888-668-9141 from within the U.S. 0-800-917-5108 from within the U.K., 1-866-485-2399 from Canada or +972-3-918-0610 from other international locations. The call will also be broadcast live through the company's Website, http://www.012.net, and will be available there for replay during the next 30 days. Notes: Non-GAAP Measurements: 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. 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, expenses recorded for stock compensation in accordance with SFAS 123®, income tax expenses and depreciation and amortization. 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 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). 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. Convenience Translation to Dollars: For the convenience of the reader, the reported NIS figures of September 30, 2009 have been presented in thousands of U.S. dollars, translated at the representative rate of exchange as of September 30, 2009 (NIS 3.75 = 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. About 012 Smile.Communications 012 Smile.Communications is a growth-oriented communication services provider in Israel with a leading market position, offering a wide range of broadband and traditional voice services. Its broadband services include broadband Internet access with a suite of value-added services, specialized data services and server hosting, as well as new innovative services such as local telephony via voice over broadband and a WiFi network of hotspots across Israel. Traditional voice services include outgoing and incoming international telephony, hubbing, roaming and signaling and calling card services. 012 Smile.Communications services residential and business customers, as well as Israeli cellular operators and international communication services providers through its integrated multipurpose network, which allows it to provide services to almost all of the homes and businesses in Israel. 012 Smile is an owned subsidiary of Internet Gold Golden Lines Ltd. (NASDAQ: IGLD - News) one of Israel's leading communications groups with a major presence across all Internet-related sectors. In addition to 012 Smile, its 100% owned Smile.Media subsidiary manages a portfolio of Internet portals and e-Commerce sites. Internet Gold and 012 Smile are part of the Eurocom Communications Group. 012 Smile's shares trade on the NASDAQ Global Market and on the Tel Aviv Stock Exchange. For additional information about 012 Smile.Communications Ltd., please visit the Company's investors' site at http://www.012.net. 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 012 Smile.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.
012 Smile.Communications Ltd.
Consolidated Balance Sheets
Convenience
translation
into US
Dollars
$1 = NIS
3.758
September December 31 September
30 30
2009 2008 2009
NIS thousands $ thousands
Current assets
Cash and cash equivalents 62,427 60,652 16,612
Marketable securities 315,585 76,742 83,977
Trade receivables, net of
allowance for doubtful accounts
of NIS 12,730 and NIS 13,139
at December 31, 2008
and September 30, 2009 188,852 203,009 50,253
Prepaid expenses and other
current assets 20,667 23,038 5,499
Deferred tax assets - 17,838 -
Total current assets 587,531 381,279 156,341
Long-term trade receivables 6,260 6,350 1,666
Marketable securities - 152,020 -
Assets held for employee
severance benefits 20,547 16,499 5,468
Property and equipment, net 177,204 169,406 47,154
Other assets, net 316,960 291,607 84,343
Other intangible assets, net 157,138 174,640 41,814
Goodwill 411,171 411,171 109,412
Total assets 1,676,811 1,602,972 446,198
012 Smile.Communications Ltd.
Consolidated Balance Sheets
Convenience
translation
into US
Dollars
$1 = NIS
3.758
September December September
30 31 30
2009 2008 2009
NIS thousands $ thousands
Liabilities and shareholders' equity
Current liabilities
Current maturities of long-term
obligations 67,884 99,295 18,064
Accounts payable 133,405 141,055 35,499
Loan from the parent company 113,225 111,344 30,129
Other payables and accrued expenses 118,726 115,339 31,593
Parent company payable 2,577 1,410 686
Related parties payables 1,923 2,228 512
Deferred tax liabilities 3,448 - 918
Total current liabilities 441,188 470,671 117,401
Long-term liabilities
Debentures 342,810 385,919 91,221
Long-term obligations and other
payables - 143 -
Deferred tax liabilities 25,995 25,535 6,917
Liability for employee severance
benefits 36,093 32,430 9,604
Total long-term liabilities 404,898 444,027 107,742
Shareholders' equity
Ordinary shares NIS 0.1 par value 2,536 2,536 675
Additional paid-in capital 616,016 612,009 163,921
Accumulated other comprehensive income
(loss) 33,925 (14,645) 9,027
Retained earnings 178,248 88,374 47,432
Total shareholders' equity 830,725 688,274 221,055
Total liabilities and shareholders'
equity 1,676,811 1,602,972 446,198
012 Smile.Communications Ltd.
Consolidated Statements of Operations
Convenience
translation
into US
Dollars
$1 = NIS
3.758
Nine month
Three-month period Nine-month period period
ended ended ended
September 30 September 30 September
30
2009 2008 2009 2008 2009
NIS thousands $ thousands
Revenue 293,703 281,803 869,008 808,767 231,242
Cost and operating
expenses:
Cost of revenue 206,742 193,156 602,136 547,213 160,227
Selling and
marketing 35,695 40,742 108,792 115,306 28,949
General and
administrative 13,919 14,118 39,279 42,399 10,452
Impairment and
other charges - - - 6,705 -
Total operating
expenses 256,356 248,016 750,207 711,623 199,628
Operating income 37,347 33,787 118,801 97,144 31,614
Financial (income) 21,740 17,966 (301) 65,311 (80)
expenses
Income before
income taxes 15,607 15,821 119,102 31,833 31,694
Income tax
expense, net 753 3,300 29,233 8,064 7,780
Net income 14,854 12,521 89,869 23,769 23,914
Earnings per share
Basic and diluted
earnings per share 0.59 0.49 3.55 0.94 0.94
Weighted average
number of ordinary
shares used in
calculation of
basic and diluted
earnings
per share 25,340,770 25,360,000 25,347,593 25,360,000 25,347,593
012 Smile.Communications Ltd.
Consolidated Statements of Cash Flows
Convenience
translation
into US
Dollars
$1 = NIS
3.758
Nine-month
Three month period Nine month period period
ended ended ended
September 30 September 30 September 30
2009 2008 2009 2008 2009
NIS thousands $ thousands
Cash flows from
operating
activities:
Net income 14,854 12,521 89,869 23,769 23,914
Adjustments to
reconcile net
income to net cash
provided by
operating activities:
Depreciation and
amortization 31,086 27,541 86,828 81,047 23,105
Stock-based
compensation 1,239 1,239 3,717 2,189 989
Deferred tax expenses
(benefit) (1,964) (2,532) 6,318 (2,597) 1,681
Accrued interest on
debentures 4,907 6,164 10,327 17,403 2,748
Increase in allowance
for doubtful accounts,
net 1,400 - 409 178 109
Increase (decrease) in
employee severance
benefits, net (1,073) 38 (385) (906) (102)
Linkage and interest
differences on
long-term obligations,
exchange rate
difference and other 13,795 6,319 13,551 44,642 3,606
Realized and
unrealized income
on marketable
securities, net 459 12,624 (23,510) 8,118 (6,256)
Changes in assets and
liabilities,
net of effects of
acquisition:
Trade receivables
including non
current portion 15,562 (6,151) 13,838 (7,446) 3,682
Prepaid expenses and
other current assets 5,736 (215) 2,371 (372) 631
Other assets, net 115 125 330 358 88
Accounts payable (6,385) 13,869 (27,703) (25,839) (7,372)
Receivables
(payables) from
parent company and
related parties, net 1,796 (10,363) 862 (5,060) 229
Other payables and
accrued expenses (17,905) (13,997) 3,387 3,822 901
Net cash provided by
operating activities 63,622 47,182 180,209 139,306 47,953
Cash flows from
investing activities:
Purchase of property
and equipment and
other assets (12,878) (16,385) (48,821) (39,882) (12,990)
Investment in trading
marketable securities (84,647) (113,900) (197,675) (312,554) (52,601)
Proceeds from sale of
marketable securities 45,187 43,523 199,122 80,440 52,986
Net cash used in
investing activities (52,338) (86,762) (47,374) (271,996) (12,605)
Cash flows from
financing activities:
Changes in short-term
bank credit, net - 1,880 - (527) -
Payments in respect
of long-term
finance arrangement (10,048) (6,046) (36,599) (19,018) (9,739)
Purchase of treasury
shares at cost - - (468) - (125)
Repayment of debentures - - (99,960) - (26,599)
Net cash used in
financing
activities (10,048) (4,166) (137,027) (19,545) (36,463)
Changes in cash and
cash equivalents 1,236 (43,746) (4,192) (152,235) (1,115)
Effect of exchange
rate changes 281 2,499 5,967 (24,829) 1,588
Cash and cash
equivalents at
beginning of the year 60,910 94,078 60,652 229,895 16,139
Cash and cash
equivalents
at end of year 62,427 52,831 62,427 52,831 16,612
012 Smile.Communications Ltd.
Reconciliation Table of Non-GAAP Measures
Convenience
translation
into US
Dollars
$1 = NIS
3.758
Nine-month
Three month period Nine month period period
ended ended ended
September 30 September 30 September 30
2009 2008 2009 2008 2009
NIS thousands $ thousands
GAAP operating 37,347 33,787 118,801 97,144 31,614
income
Adjustments
Amortization of
acquired
intangible assets 5,720 6,820 17,160 20,460 4,565
Other charges - - - 6,705 -
Expenses recorded for
stock compensation in
accordance with ASC
718 (previously SFAS
123®) 1,239 1,239 3,717 2,189 989
Non-GAAP adjusted
operating income 44,306 41,846 139,678 126,498 37,168
GAAP tax expenses, net 753 3,300 29,233 8,064 7,780
Adjustments
Amortization of
acquired intangible
assets Included in
tax expenses, net 8,787 1,841 11,761 5,524 3,128
Non-GAAP tax
expenses, net 9,540 5,141 40,994 13,588 10,908
Net income as
reported 14,854 12,521 89,869 23,769 23,914
Taxes on income 753 3,300 29,233 8,064 7,780
Other charges - - - 6,705 -
Expenses recorded for
stock compensation in
accordance with SFAS
123® 1,239 1,239 3,717 2,189 989
Financial (income)
expenses 21,740 17,966 (301) 65,311 (80)
Depreciation and
amortization 31,086 27,541 86,828 81,047 23,104
Adjusted EBITDA 69,672 62,567 209,346 187,085 55,707
For further information, please contact:
012 Smile.Communications Ltd
+972-72-2003848
i.azulay@smile.net.il
Investor relations contacts:
Mor Dagan - Investor Relations
mor@km-ir.co.il / Tel: +972-3-516-7620
Garth Russell - KCSA Strategic Communications
grussell@kcsa.com / Tel: +1-212-896-1250
Source: 012 Smile.communications Ltd.
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