012 Smile.Communications (NASDAQ Global Market: SMLC) (TASE:
SMLC) today reported its financial results for the fourth quarter
and full year ended December 31, 2009.
- Highlights
- Record revenues and
profitability for the quarter: Revenues for the fourth quarter
reached NIS 305 million ($81 million) and net income was a record
NIS 60 million ($16 million).
- Record revenues and
profitability for 2009: Revenues for the full year reached a
record of NIS 1,174 ($311 million) and net income was a record NIS
150 million ($40 million).
- Progress of Bezeq
Acquisition: Actions completed to date include:
- The completion of the sale of
012 Smile.Communication's legacy telecommunications business for
NIS 1.2 billion, a prerequisite established by Israel’s regulators
for the acquisition of a controlling interest in Bezeq - The Israel
Telecommunications Corporation Ltd.
- The signing of a NIS 3.9 billion
financing agreement with a consortium of banks led by Bank
Hapoalim.
- The signing of a financing
agreement of up to NIS 500 million ($133 million) with Migdal
Insurance.
Financial Results for the Fourth Quarter of 2009
Revenues: Revenues for the fourth quarter totaled NIS 305
million (US $81 million), a 3% increase compared with NIS 297
million for the comparable period in 2008.
Operating Income: Operating income for the fourth quarter
reached a record NIS 58 million (US $15 million), an 89% increase
compared with NIS 31 million in the fourth quarter of 2008. In
accordance with U.S. generally accepted accounting principles, NIS
23 million (US $6 million) of scheduled depreciation and
amortization costs associated with the legacy telecommunication
assets that were the subject of a sale agreement entered into in
November 2009 and finalized in January 2010, were not charged to
operating expenses.
Adjusted EBITDA: Adjusted EBITDA for the period reached
NIS 71 million (US $19 million), a 13% increase compared with NIS
63 million for 2008.
Net income: Net income for the quarter was a record of
NIS 60 million (US $16 million), or NIS 2.38 (US $0.63) per basic
and NIS 2.36 (US $0.63) per diluted share, compared to NIS 25
million, or NIS 0.97 basic and diluted per share, for the fourth
quarter of 2008.
Net Financial Income: Net financial income, for the
fourth quarter of 2009 totaled NIS 32 million (US $8 million). Net
financial income primarily includes: (1) NIS 41 million (US $11
million) associated with the mark-to-market of certain trading
marketable securities whose values increased as a result of the
global improvement in the capital markets and the selling of
certain "available for sale" marketable securities; and (2)
financial expenses of NIS 6 million (US $2 million) associated with
the Company’s bonds.
Financial Results for 2009
Revenues: Revenues for the twelve months ended December
31, 2009 were NIS 1,174 million ($311 million) a 6% increase
compared to NIS 1,106 million for 2008.
Operating Income: Operating income for 2009 reached NIS
177 million (US $47 million), a 38% increase compared with NIS 128
million for 2008. Adjusted EBITDA for the year reached NIS 280
million (US $74 million), a 12% increase compared with NIS 250
million for 2008. Net income for 2009 was NIS 150 million (US $40
million), or NIS 5.93 (US $1.57) basic and diluted per share,
compared to NIS 48 million, or NIS 1.91 basic and diluted per
share, for 2008.
Balance Sheet: Shareholders’ equity as of December 31,
2009 was NIS 860 million ($228 million), representing 36% of total
assets. During the year 2009, Shareholders’ Equity increased by 25%
from NIS 688 million, and long term liabilities decreased by 23%
from NIS 444 million as of December 31, 2008 to NIS 343 million at
December 31, 2009.
In accordance with ASC 360-10 (Formerly known as FAS 144),
“Accounting for the Impairment or Disposal of Long-Lived Asset,”
the Company’s legacy telecommunications assets and liabilities that
were sold subsequent to the balance sheet date were classified as
“held for sale” in the Company’s balance sheet as of December 31,
2009. As of December 31, 2009, assets held for sale totaled NIS
1,370 million (US $363 million) and liabilities held for sale
totaled NIS 297 million (US $79 million).
Comments of Management
Commenting on the results, Ms. Stella Handler, the former CEO of
the Company who continues to manage the legacy telecommunication
business that was sold in January 2010, said, “The fourth quarter
was a strong end to an active year during which we achieved record
results despite significant challenges, demonstrating our success
in expanding the breadth of the services offered to stable and
resilient Israeli communications market.”
Mr. Shaul Elovitch, Chairman of the Board of 012
Smile.Communications, added, "We are very pleased with the
progress that we have made towards closing the Bezeq acquisition.
We are fully committed to this transaction and currently focused on
obtaining the remaining required regulatory approvals. We feel very
comfortable with the progress and foresee completion on time as
planned."
Notes:
A) ASC 360-10: In accordance with ASC
360-10, the telecommunications business classified as “held for
sale” was initially quantified at the lower of its carrying amount
or “fair value less cost to sell” as of the date on which the
Company’s management was committed to a plan to sell it, and was
not depreciated or amortized from that date.
B) 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 ASC 718-10 (Formerly
known as SFAS 123(R)), 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 December 31, 2009 have
been presented in thousands of U.S. dollars, translated at the
representative rate of exchange as of December 31, 2009 (NIS 3.775
= 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 (Nasdaq: SMLC - News) is a 75.3%-owned
subsidiary of Internet Gold (Nasdaq: IGLD - News). Internet Gold is
a subsidiary of Eurocom Communications Ltd.
In October 2009, 012 Smile.Communications signed a definitive
agreement to purchase the controlling interest (approximately
30.6%) in Bezeq, The Israel Telecommunication Corp. Ltd., Israel’s
largest telecommunications provider (TASE: BZEQ).
For further information, please visit our website:
www.012smile.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 risks associated with the pending acquisition of the
controlling interest in Bezeq The Israel Telecommunication Corp.
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.
Consolidated Balance
Sheets
Convenience translation
into U.S. dollars $1 = NIS 3.775 December
31 December 31 2009 2008 2009
(Unaudited) (Audited) (Unaudited) NIS
thousands $ thousands Current assets Cash
and cash equivalents
940,603 60,652
249,166
Marketable securities
98,640 76,742
26,130 Trade
receivables, net
- 203,009
- Related parties
receivables
1,787 -
474 Prepaid expenses and other
current assets
3,682 23,038
975 Deferred tax assets
1,619 17,838
429 Total current assets
1,046,331 381,279
277,174 Assets classified
as held for sale 1,370,072 -
362,933
Investments Long-term trade receivables
- 6,350
- Marketable securities
- 152,020
- Assets
held for employee severance benefits
- 16,499
-
Property and equipment, net
- 169,406
- Other assets,
net
- 291,607
- Other intangible assets, net
-
174,640
- Goodwill
- 411,171
- Total
assets 2,416,403 1,602,972
640,107
Consolidated Balance Sheets
(cont'd)
Convenience
translation into U.S. dollars $1 = NIS 3.775
December 31 December 31 2009 2008
2009 (Unaudited) (Audited) (Unaudited)
NIS thousands $ thousands Current
liabilities Short-term bank credit
447,679 -
118,590 Current maturities of long-term obligations
72,357 99,295
19,167 Accounts payable
-
141,055
- Loan from the parent company
331,655
111,344
87,856 Parent company payables
660 1,410
175 Related parties payables
- 2,228
- Other
payables and accrued expenses
64,187 115,339
17,003 Total current liabilities
916,538 470,671
242,791
Liabilities classified as held for sale 296,868
-
78,641 Long-term
liabilities Debentures
343,425 385,919
90,974
Long term obligations and other payables
- 143
-
Deferred tax liabilities
- 25,535
- Liability for
employee severance benefits
- 32,430
-
Total long-term liabilities
343,425
444,027
90,974 Shareholders'
equity Ordinary share NIS 0.1 par value
2,536
2,536
672 Additional paid in capital
617,726
612,009
163,636 Treasury shares at cost
(468 )
-
(124 ) Accumulated other comprehensive income
(loss)
1,169 (14,645 )
309 Retained earnings
238,609 88,374
63,208
Total shareholder’s equity 859,572 688,274
227,701 Total liabilities and
shareholders' equity 2,416,403 1,602,972
640,107
Consolidated Statements of
Operations
Convenience
translation into U.S. dollars $1 = NIS 3.775
Year ended Year ended December 31 December 31
2009 2008 2007 2009
(Unaudited) (Audited) (Audited)
(Unaudited) NIS thousands $ thousands
Revenue 1,174,094 1,106,203 1,102,888
311,018 Costs and operating expenses
Cost of revenue
801,705 753,416 762,205
212,372
Selling and marketing
140,359 162,274 157,304
37,181
General and administrative
53,346 55,913 57,984
14,131 Impairment and other charges
1,888
6,705 10,433
500 Total operating
expenses 997,298 978,308 987,926
264,184
Operating income 176,796 127,895
114,962
46,834 Financial (income) expenses, net
(32,570 ) 57,239 52,043
(8,627 )
Income before income tax expense 209,366
70,656 62,919
55,461 Income tax expense
59,131
22,174 23,027
15,664 Net income
150,235 48,482 39,892
39,797
Earnings per share
Basic and diluted earnings per
share (in NIS)
5.93 1.91 2.05
1.57
Weighted average number of
ordinary shares used in calculation of basic and diluted earnings
per share
25,345,868 25,360,000 19,493,329
25,345,868
Reconciliation Table of
Non-GAAP Measures
Year ended December 31
2009 2008 (Unaudited) NIS
thousands GAAP operating income
176,796 127,895
Adjustments Amortization of acquired intangible
assets
18,761 27,280 Impairment and other charges
1,888 6,705
Expenses recorded for share-based
compensation in accordance with ASC 718 (previously SFAS 123
(R))
4,956 3,429
Non-GAAP adjusted operating
income 202,401 165,309 GAAP tax expenses,
net
59,131 22,174
Adjustments Amortization of
acquired intangible assets included in tax expenses, net
6,900 7,365
Non-GAAP tax expenses, net
66,031 29,539 Net income as reported
150,235 48,482 Income tax expenses
59,131
22,174 Impairment and other charges
1,888 6,705
Expenses recorded for share-based
compensation in accordance with ASC 718 (previously SFAS 123
(R))
4,956 3,429 Financial (income) expenses, net
(32,570
) 57,239 Depreciation and amortization
96,760
111,723
Adjusted EBITDA 280,400 249,752
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