Internet Gold’s net loss for the second quarter totaled NIS 33 million (US$ 10 million) compared with a net loss of NIS 43 million (US$ 13 million) in the second quarter of 2010. This net loss reflected the impact of two significant expenses:
- Amortization of tangible and identifiable intangible assets resulting from the Bezeq acquisition: According to the standards of business combination accounting, the total purchase price of Bezeq was allocated to Bezeq’s tangible and identifiable intangible assets based on their estimated fair values. During the second quarter of 2011, Internet Gold's subsidiary, B Communications, recorded amortization expenses of NIS 310 million (US$ 91 million) related to the Bezeq purchase price allocation (“Bezeq PPA”). B Communications is amortizing certain of the acquired identifiable intangible assets in accordance with the economic future benefits expected from such assets using an accelerated method of amortization under which approximately 16% of the acquired identifiable intangible assets were amortized during 2010 and an additional 15% will be amortized during 2011.
- Financial expenses: B Communications’ financial expenses, net for the second quarter totaled NIS 98 million (US$ 29 million). These expenses consisted primarily of interest on the long-term loans incurred to finance the Bezeq acquisition, which totaled NIS 86 million (US$ 25 million), and expenses related to its debentures, which totaled NIS 14 million (US$ 4 million). In addition, Internet Gold incurred financial expenses, net totaling NIS 27 million (US$ 8 million), reflecting the interest payments it made during the period to holders of its two series of outstanding debentures.
Internet Gold Unconsolidated Financial Results
|(NIS millions)||(US$ millions)|
|Tax and other expenses||2||-|
|Interest in BCOM's net loss||(8||)||(2||)|
Comments of Management
Commenting on the results, Mr. Eli Holtzman, CEO of Internet Gold, said, “The second quarter was another period of progress during which we continued to accelerate the debt repayment plan of our subsidiary, B Communications, due primarily to the significant current and special dividends that it received on May 19 from Bezeq. From April 14, 2010 through June 30, 2011, B Communications repaid approximately NIS 1.5 billion (US$ 439 million) of its bank debt, comprised in part of NIS 1,307 million (US$ 383 million) of principal, and its finance plan continues to progress ahead-of-schedule. We are also very pleased with developments at Bezeq, and continue to focus on the smooth execution of our loan repayment plan. In parallel, we continue looking for opportunities to create additional value for our shareholders."Consolidation of Bezeq Results
- Bezeq results consolidated for entire second quarter of 2011: Internet Gold’s results for the second quarter of 2011 reflect the consolidation of the operations of Bezeq for the entire three-month period. However, Internet Gold’s results for the comparative period of 2010 included Bezeq’s results commencing April 14, 2010, the date of the acquisition.
- Supplemental unconsolidated results table: To provide investors with transparent insight into its business, Internet Gold has also provided its results on an unconsolidated basis. Internet Gold’s interest in B Communications’ net income is presented as a single line item in the unconsolidated table (see above, “Internet Gold’s Unconsolidated Q2 Financial Results”).
|Bezeq Group (Consolidated) 1||Q2 2011||Q2 2010||Change|
|Net profit attributable to Company shareholders||585||638||-8.3||%|
|Diluted EPS (NIS)||0.21||0.24||-12.5||%|
|Cash flow from operating activities||670||976||-31.4||%|
|Capex payments, net 2||406||370||9.7||%|
|Free cash flow 3||264||606||-56.4||%|
|Net debt/EBITDA (end of period) 4||1.33||1.07|
|Net debt/shareholders' equity (end of period)||2.66||0.92|
|A.||Convenience Translation to Dollars: For the convenience of the reader, certain of the reported NIS figures of June 30, 2011 and for the periods then ended, and for the comparative periods have been presented in millions of U.S. dollars, translated at the representative rate of exchange as of June 30, 2011 (NIS 3.415 = 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 Bezeq’s management regularly internally use supplemental non-IFRS financial measures 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 Bezeq’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. Bezeq 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 Bezeq’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.|
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