Internet Gold (NASDAQ: IGLD) (TASE: IGLD) today reported its financial results for the second quarter ended June 30, 2010.
Consolidation of Bezeq Results
On April 14, 2010, Internet Gold’s subsidiary B Communications (approximately 76.62%-owned) (NASDAQ: BCOM) (TASE: BCOM) completed its acquisition of the controlling interest (approximately 30.42%) of Bezeq - The Israel Telecommunication Corp., Ltd. (“Bezeq”) in consideration for approximately NIS 6.5 billion (approximately US$ 1.67 billion). Internet Gold began consolidating Bezeq’s results into its financial statements as of the transaction date. In contemplation of its acquisition of the controlling interest in Bezeq, on January 1, 2010, the Company adopted International Financial Reporting Standards as issued by the International Accounting Standards Board, which are the financial reporting standards utilized by Bezeq, to replace its previous reporting standard, generally accepted accounting principles in the United States (US GAAP) (See Note C below).
To provide investors with transparent
insight into its business, the Company has also provided its results on an unconsolidated basis in which its interest in Bezeq’s net income is presented as a single line item (see below, “Internet Gold’s Unconsolidated Q2 Financial Results”).
Internet Gold’s Financial Results for Q2
Internet Gold’s revenues for the second quarter are derived primarily from Bezeq, whose results have been consolidated into Internet Gold’s financial statements as of April 14, 2010. In addition, revenues include the modest contribution of its media business, which totaled NIS 20 million (US$ 5 million) for the period. As such, Internet Gold’s revenues for the second quarter were NIS 2.6 billion (US$ 671 million), an eight-fold increase compared with NIS 309 million reported in the second quarter of 2009, when its revenues consisted primarily of the Company’s legacy communications business that was sold to Ampal-American Israel Corporation as of January 1, 2010.
Internet Gold’s net loss for the second quarter was NIS 20 million (US$ 5 million). The net loss reflects mainly the impact of three significant expenses recorded by B Communications:
- One-time expenses of NIS 47 million (US$ 12 million) related to the Bezeq acquisition, primarily for legal and financial advisory fees.
- Financial expenses of NIS 88 million (US$ 23 million), consisting primarily of NIS 73 million (US$19 million) in interest on the long-term loans incurred to finance the Bezeq acquisition and NIS 9 million (US$ 2 million) in expenses related to prevailing interest rates and changes in the CPI and their effect on the Company’s CPI-linked debentures.
- Amortization (net) of NIS 42 million (US$ 11 million) related to the Bezeq purchase price allocation (see Note B below).
Internet Gold’s cash and cash equivalents as of June 30, 2010 (those held by Internet Gold and B Communications without consolidating Bezeq's cash and cash equivalents) were NIS 670 million (US$ 173 million). Total gross debt (without consolidating Bezeq’s debt) totaled NIS 5.6 billion (US$ 1.4 billion) and net financial debt (without consolidating Bezeq’s debt) was NIS 4.9 billion (US$ 1.3 billion) representing 75% of the total NIS 6.5 billion Bezeq acquisition price.