NETANYA, Israel, November 16 /PRNewswire-FirstCall/ --
Third Quarter 2009 Highlights (compared to the third quarter 2008[2]):
- Total Revenues increased 1.5% reaching NIS 1,675 million
($446 million)
- Total Revenues from services increased 0.9% to NIS 1,493
million ($397 million)
- Revenues from content and value added services (including
SMS) increased 32.4%, representing 15.3% of services revenues
- EBITDA[3] increased 2.6% to NIS 670 million ($178 million);
EBITDA margin 40%3, up from 39.6%
- Operating income increased 5.4% to NIS 468 million ($125
million)
- Net income[4] increased 19.4% to NIS 289 million ($77
million)
- Free cash flow1 totaled NIS 454 million ($121 million)
- Subscriber base increased by approx. 31,000 net subscribers
during the quarter, mostly post-paid subscribers; reaching approx.
3.259 million at the end of September 2009
- 3G subscribers reached approx. 941,000 at the end of
September 2009, net addition of approx. 64,000 in the third quarter
2009
- The Company declared a third quarter dividend of NIS 2.90
per share
Cellcom Israel Ltd. (NYSE: CEL TASE: CEL) ("Cellcom Israel", the "Company"), announced today its financial results for the third quarter of 2009. Revenues for the third quarter 2009 totaled NIS 1,675 million ($446 million); EBITDA for the third quarter 2009 totaled NIS 670 million3 ($178 million), or 40%3 of revenues; and net income for the third quarter 2009 reached NIS 289 million4 ($77 million). Basic earnings per share for the third quarter 2009 reached NIS 2.94 ($0.78).
Commenting on the results, Amos Shapira, Chief Executive Officer said, "This has been another quarter of strong financial performance as we achieved record revenues, operating income and EBITDA, all of which the highest in the Company's history. We continued to strengthen our leading market position, further increasing our customer base, with an approximate 39% year over year increase in our 3G subscribers, characterized by higher ARPU. This strong financial performance and growing market position is especially noteworthy in light of the ongoing airtime price erosion, the competitive and regulatory environment, as well as the challenging macro-economic environment.
After substantial amount of quarters of rapid growth of content and SMS revenues, this quarter we have also became the cellular operator with the highest revenues in this area. Furthermore, this quarter our landline service revenues to the business segment continued to grow, as we continue to leverage our fiber optic and microwave infrastructure.
We at Cellcom Israel, remain focused on the Company's core competencies, cellular communications, while continuing to develop new businesses in areas, which are synergetic to our core business and can produce reasonable return on both the organizational and management investment. Our strategy to focus in the core business is the main factor for our being market leaders in terms of revenues, profit and profit margins and now also in content and SMS revenues. Along with our effort to generate revenues and profitability growth, we continue tirelessly our efficiency measures in any area or business of the Company. All these efforts to increase revenues, develop additional businesses and continue with efficiency measures, go hand in hand with our improved customer service, as reflected in the "Public Trust" organization report, which stated that Cellcom Israel provides the best quality of customer care in the Israeli Cellular market and that we received the lowest number of customer complaints although we have the highest number of subscribers in the Israeli cellular market.
We believe that our steadfast focus on our core competencies and proven business strategy, paired with our strong cash flow, will enable us to continue to successfully navigate our business. Furthermore, we believe that the dynamic changes in the local communications market may create many opportunities. We will identify and track these opportunities once they arise, and analyze them with a goal to continuing to generate long term growth", concluded Mr. Shapira.
Yaacov Heen, Chief Financial Officer, commented: "Our record revenues, operating income and EBITDA were primarily achieved due to a 32.4% increase in revenues from content and value added services as well as growing landline revenues. These two revenue growth drivers totally offset the decline in roaming revenues this quarter, primarily attributed to the macro-economic environment. Moreover, our continued prudent expense management further contributed to profitability with EBITDA increasing 2.6%3 from last year, reaching NIS 670 million3. In terms of cash generation, we continued to generate a healthy Free cash flow, totaling to NIS 454 million, enabling us to once again distribute approximately NIS 286 million, representing approximately 99% of net income, as a dividend to our shareholders."
Main Financial and Performance Indicators[5]:
Q3/2009 Q3/2008 % Change Q3/2009 Q3/2008
million NIS million US$
(convenience
translation)
Total Services revenues 1,493 1,480 0.9% 397.3 393.8
Revenues from content and
value added services 229 173 32.4% 60.9 46.0
Handset and accessories
revenues 182 170 7.1% 48.4 45.2
Total revenues 1,675 1,650 1.5% 445.7 439.1
Operating income 468 444 5.4% 124.5 118.1
Net Income 289 242 19.4% 76.9 64.4
EBITDA, after elimination
of a one-time provision[3]
in Q3/2009 670 653 2.6% 178.3 173.8
EBITDA, as percent of
Revenues, after
elimination of a one-time
provision[3] in Q3/2009 40.0% 39.6% 1.0%
Subscribers end of period
(in thousands) 3,259 3,157 3.2%
Monthly ARPU 150.4 154.3 (2.5%) 40.0 41.1
Average Monthly MOU * 338.1 336.3 0.5%
* Following the regulatory requirement to change the basic airtime charging unit from twelve-seconds to one-second units commencing January 1, 2009, MOU for the third quarter of 2008 has been adjusted to the same per-one second unit basis to enable a comparison. MOU for the third quarter of 2008 based on the former charging units was 357.4 minutes.
Financial Review
Revenues for the third quarter of 2009 increased 1.5% totaling NIS 1,675 million ($446 million), compared to NIS 1,650 million ($439 million) in the third quarter last year. The increase in revenues is attributed to a 0.9% increase in revenues from services, which reached NIS 1,493 million ($397 million) in the third quarter 2009 as compared to NIS 1,480 million ($394 million) in the third quarter last year. The increase also resulted from a 7.1% increase in handset and accessories' revenues, which rose from NIS 170 million ($45 million) in the third quarter last year, to NIS 182 million ($48 million) in the third quarter 2009.
The higher service revenues resulted mainly from a 32.4% increase in content and value added services (including SMS) revenues in the third quarter 2009, compared to the third quarter last year. Revenues from content and value added services reached NIS 229 million ($61 million), or 15.3% of service revenues. Furthermore, the increase in landline services revenues during the quarter also contributed to the higher service revenues. These increases were partially offset by the ongoing airtime price erosion as well as a substantial decrease in revenues from roaming services following the significant reduction in incoming and outgoing tourism resulting from the global economic slowdown.
Cost of revenues for the third quarter of 2009 totaled NIS 856 million ($228 million) compared to NIS 852 million ($227 million) in the third quarter last year. Cost of revenues reflects the deferral of handsets subsidies, which amounted to NIS 21 million ($6 million) in the third quarter of 2009 compared to NIS 23 million ($6 million) in the third quarter last year. The amortization of such deferred handsets subsidies totaled NIS 18 million ($5 million) in the third quarter 2009 compared to NIS 19 million ($5 million) in the third quarter 2008. The increase in cost of revenues resulted mainly from a one-time provision in the amount of NIS 15 million ($4 million), since the Company intends to negotiate a settlement of a dispute with the Ministry of Communications regarding frequencies fees, pending in the Israeli Supreme Court. The increase in cost of revenues also resulted from an increase in cost of content and value-added services, due to increased usage, as well as an increase in rent expenses. These increases were partially offset by a decrease in royalties to the Ministry of Communications due to the lower royalties' rate in 2009, a decrease in handset costs resulting from a decline in the number of handsets sold during the third quarter of 2009, as compared to the third quarter of last year, as well as lower depreciation expenses.
Gross profit for the third quarter of 2009 increased 2.6%, reaching NIS 819 million ($218 million), compared to NIS 798 million ($212 million) in the third quarter of 2008. Gross profit margin for the third quarter 2009 increased from 48.4% in the third quarter last year to 48.9%.
Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the third quarter of 2009 decreased 0.3% to NIS 351 million ($93 million), compared to NIS 352 million ($94 million) in the third quarter of 2008. The decrease in SG&A Expenses in the quarter is mainly due to a decrease in advertising expenses. This decrease was partially offset by an increase in amortization of deferred sales commissions from NIS 10 million ($3 million) in third quarter last year to NIS 15 million ($4 million) in the third quarter this year, while deferred sales commissions increased from approximately NIS 14 million ($4 million) in third quarter last year to approximately NIS 16 million ($4 million) in the third quarter this year. The decrease in SG&A Expenses was also offset in part by an increase in bad debts and doubtful accounts expenses, following, among others, the number portability, which allows subscribers to switch between cellular operators prior to settling their outstanding debt. The increase in bad debts and doubtful accounts also has been influenced by the global economic slowdown.
Operating income for the third quarter 2009 increased 5.4%, reaching a record of NIS 468 million ($125 million), compared to NIS 444 million ($118 million) in the third quarter last year.
EBITDA for the third quarter 2009, excluding the above mentioned one-time provision, increased 2.6% to a record of NIS 670 million ($178 million). Including the above mentioned one-time provision, EBITDA increased 0.3%, also reaching a record of NIS 655 million ($174 million), compared to NIS 653 million ($174 million) in the third quarter of 2008. EBITDA, as a percent of revenues, totaled 40.0%, or 39.1% without elimination of the above mentioned one-time provision, compared to 39.6% in the third quarter last year.
Financing Expenses, net for the third quarter 2009 totaled NIS 122 million ($32 million), compared to NIS 109 million ($29 million) in the third quarter last year. The increase resulted mainly from the increase in interest and Israeli Consumer Price Index (CPI) linkage expenses, associated with the Company's debentures, resulting from the increased debt level and higher inflation in the third quarter this year, as compared to the third quarter last year. The increase was partially offset by an income resulting from foreign currency differences, mainly with the appreciation of the NIS against the US dollar in the third quarter of 2009, impacting the trade payables balances in the third quarter of 2009, as compared to an expense in the third quarter last year, resulted from the depreciation of the NIS against the US dollar in the third quarter of 2008.
Income tax for the third quarter 2009 decreased 38.7%, totaling NIS 57 million ($15 million), compared to NIS 93 million ($25 million) in the third quarter last year. The decrease was mainly due to the Israeli parliament enactment of the law of "Economic efficiency improvement" (legislation amendments for the implementation of the Economic program for the years 2009 and 2010), which provides, among others, for a gradual reduction of the Corporate tax rate from 25% in 2010 up to 18% in the year 2016 onward. The aforementioned change in the tax rates resulted in the reduction of deferred tax liabilities and the recognition of a one-time tax income of approximately NIS 41 million ($11 million) in the third quarter of 2009.
Net Income for the third quarter 2009, including the effects of the above mentioned one-time provision and one-time tax income, increased 19.4% to NIS 289 million ($77 million), compared to NIS 242 million ($64 million) in the third quarter last year. Excluding the above mentioned one-time effects, net income increased 7.0% to NIS 259 million ($69 million). Basic earnings per share for the third quarter 2009 (including the above mentioned one-time effects) totaled NIS 2.94 ($0.78), compared to NIS 2.48 ($0.66) in the third quarter 2008.
Operating Review
New Subscribers - at the end of September 2009 the Company had approximately 3.259 million subscribers. During the third quarter of 2009 the Company added approximately 31,000 net new subscribers, mostly post-paid.
In the third quarter of 2009, the Company added approximately 64,000 net new 3G subscribers to its 3G subscriber base, reaching approximately 941,000 3G subscribers at the end of September 2009. The Company's 3G subscribers represented 28.9% of the Company's total subscriber base at the end of the third quarter 2009, an increase from the 21.5% 3G subscribers represented of total subscribers at the end of September 2008.
The Churn Rate in the third quarter 2009 totaled to 4.9%, compared to 4.4% in the third quarter last year. The quarterly churn remains primarily impacted by the churn of lower contribution pre-paid subscribers and subscribers with collection problems.
Average monthly subscriber Minutes of Use ("MOU") in the third quarter 2009 totaled 338.1 minutes, compared to 336.3 minutes in the third quarter 2008, an increase of 0.5%. Following the regulatory requirement to change the basic airtime charging units from twelve-seconds to one-second units commencing January 1, 2009, MOU for the third quarter 2008 has been adjusted to the same per-one second unit basis to enable a comparison. MOU for the third quarter of 2008 based on the former charging units was 357.4 minutes.
The monthly Average Revenue per User (ARPU) for the third quarter 2009 and totaled NIS 150.4 ($40.0), a 2.5% decrease compared to NIS 154.3 ($41.1) in the third quarter last year. This decrease resulted, among others, from the lower roaming revenues recorded during the third quarter 2009 following the decline in tourism.
Financing and Investment Review
Cash Flow
Free cash flow for the third quarter of 2009 totaled NIS 454 million ($121 million), compared to NIS 480 million ($128 million) generated in the third quarter of 2008. Free cash flow for the third quarter this year includes NIS 124 million ($33 million) invested in the Company's current debentures portfolio according to its investment policy. Free cash flow for the first nine months of 2009 totaled NIS 1,247 million, an approximate 47% increase compared to the first nine months of 2008.
Shareholders' Equity
Shareholders' Equity as of September 30, 2009 amounted to NIS 389 million ($103 million), primarily consisting of accumulated undistributed retained earnings.
Investment in Fixed Assets and Intangible Assets
During the third quarter 2009, the Company invested NIS 156 million ($42 million) in fixed assets and intangible assets (including, among others, deferred sales commissions and handsets subsidies and investments in information systems and software), compared to NIS 166 million ($44 million) in the third quarter 2008.
Dividend
On November 15, 2009, the Company's board of directors declared a cash dividend in the amount of NIS 2.90 per share, and in the aggregate amount of approximately NIS 286 million (the equivalent of approximately $0.77 per share and approximately $76 million in the aggregate, based on the representative rate of exchange on November 12, 2009; The actual US$ amount for dividend paid in US$ will be converted from NIS based upon the representative rate of exchange published by the Bank of Israel on December 10, 2009), subject to withholding tax described below. The total dividend amount may increase to up to approximately NIS 287 million if new shares are issued prior to the dividend record date, as a result of the exercise of options under the Company's "2006 Share Incentive Plan" (for additional details please see the Company's most recent annual report for the year ended December 31, 2008 on Form 20-F under "Item 5. Operating and Financial Review and Prospects - A. Operating Results - 2006 Share Incentive Plan" and "Item 6. Directors, Senior Management and Employees - D. Employees - 2006 Share Incentive Plan"). The dividend will be payable to all of the Company's shareholders of record at the end of the trading day in the NYSE on December 2, 2009. The payment date will be December 14, 2009. According to the Israeli tax law, the Company will deduct at source 20% of the dividend amount payable to each shareholder, as aforesaid, subject to applicable exemptions. The dividend per share that the Company will pay for the third quarter of 2009 does not reflect the level of dividends that will be paid for future quarterly periods, which can change at any time in accordance with the Company's dividend policy. A dividend declaration is not guaranteed and is subject to the Company's board of directors' sole discretion, as detailed in the Company's annual report for the year ended December 31, 2008 on Form 20-F, under "Item 8 - Financial Information - Dividend Policy".
Other developments during the third quarter of 2009 and subsequent to balance sheet date
Site Licensing
Following the previously reported recommendations of an Israeli inter-ministry committee regarding the appropriateness of future application of the exemption from obtaining building permits for radio access devices, relied upon by cellular operators, including the Company, the Attorney General of Israel concluded that current application of the exemption does not balance properly the different interests involved and therefore cannot continue. The Attorney General further concluded that in accordance with its authority under applicable law, the Ministry of Interior (in consultation with the Ministry of Communications) should prepare regulations setting conditions for the application of the exemption, such as limiting the exemption to extraordinary circumstances, and bring such regulations for approval by the Economy Committee of the Israeli Parliament by the end of October 2009. Conditions substantially limiting the Company's ability to use the exemption could adversely affect the Company's existing network and network build-out. To the best of the Company's knowledge, to date, no such regulations were brought before the Economy Committee.
As previously disclosed, additional hardship on the construction and operation of cell sites is expected if the proposed changes to the National Zoning Plan 36, which includes guidelines for constructing cell sites, are approved by the National Committee and thereafter by the government of Israel. The National Committee is expected to deliberate on the subject in the coming weeks.
For additional details see the Company's most recent annual report for the year ended December 31, 2008 on Form 20-F under "Item 3. Key Information - D. Risk Factors - Risks related to our business - We may not be able to obtain permits to construct cell sites" as well as under "Item 4. Information on the Company - B. Business Overview - Government Regulations - Permits for Cell site Construction - National Zoning Plan 36, Site Licensing" and "Construction and operating permits from the commissioner of environmental radiation" as well as our report on Form 6-K dated August 17, 2009 under "Site Licensing".
Regulation
The Ministry of Communications has commenced examination of the interconnect fees and pricing of a cellular network elements, following the previously reported 2008 resolutions of the Israeli government to (1) examine interconnect fees and further revise them and (2) to accelerate the procedures necessary to allow the entry of MVNOs and additional infrastructure based operators to the cellular market, which was followed by an amendment to the Communication Law in July 2009, instructing the Ministry Of Communications, among others, to set the price of the service, should the operator and MVNO fail to reach an agreement within 6 months, due to unreasonable conditions imposed by the cellular operator.
In addition, the Ministry of Communications has published general principles for an additional UMTS spectrum tender, expected to be published by the beginning of 2010. According to the principles published, which the MOC noted that may still change, the tender will include additional UMTS spectrum for two additional UMTS operators; participation will be allowed for new operators and MIRS communication Ltd. - the only cellular operator without a UMTS network; and the winners shall be awarded various benefits and leniencies such as discounts in spectrum fees and a five year exemption from royalties payment, rebates on spectrum allocation fees and license fees; additional means to facilitate their entry are under consideration.
For additional details see the Company's most recent annual report for the year ended December 31, 2008 on Form 20-F under "Item 3. Key Information - D. Risk Factors - Risks related to our business - We operate in a heavily regulated industry, which can harm our results of operations" and "We face intense competition in all aspects of our business" as well as under "Item 4. Information on the Company - B. Business Overview - Competition" and "Government Regulations - Tariff Supervision" and "Mobile Virtual Network Operators".
Financing
In September 2009, the commissioner of capital markets, insurance and savings in the in the Ministry of Finance, has published a draft circular as to the adoption of recommendations included in an interim report of a committee nominated in order to set parameters of conduct of institutional investors providing credit through acquisition of non-governmental debentures. The committee's interim report, which was published for comments of the public, includes recommendations for regulatory intervention in establishing internal procedures, verification that the debentures include certain contractual terms and obtaining of necessary information for examination of investment in the debentures, to be required of institutional investors before investing in non governmental debentures at their issuance stage. There is no certainty as to what will be the committee's final recommendations and which recommendations will be adopted. If the committee's interim report recommendations are adopted, they may adversely affect the Company's possibilities of raising debt from institutional investors.
For additional details on the Company's debt see the Company's most recent annual report for the year ended December 31, 2008 on Form 20-F under "Item 3. Key Information - D. Risk Factors - Our substantial debt increases our exposure to market risks, may limit our ability to incur additional debt that may be necessary to fund our operations and could adversely affect our financial stability" and under "Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources", as well as our report on Form 6-K dated May 26, 2009 under "Shelf prospectus and issuance of debentures".
Conference Call Details
The Company will be hosting a conference call on Monday, November 16, 2009 at 09:00 am ET, 04:00 pm Israel time, and 02:00 pm UK time. On the call, management will review and discuss the results, and will be available to answer questions. To participate, please either access the live webcast on the Company's website, or call one of the following teleconferencing numbers below. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, please try the international dial-in number.
US Dial-in Number: 1-888-407-2553 UK Dial-in Number: 0800-917-9141
Israel Dial-in Number: 03-918-0650 International Dial-in Number: +972-3-918-0650
at: 09:00 am Eastern Time; 06:00 am Pacific Time; 02:00 pm UK Time; 04:00 pm Israel Time
To access the live webcast of the conference call, please access the investor relations section of Cellcom Israel's website: http://www.cellcom.co.il. After the call, a replay of the call will be available under the same investor relations section.
About Cellcom Israel
Cellcom Israel Ltd., established in 1994, is the leading Israeli cellular provider; Cellcom Israel provides its approximately 3.259 million subscribers (as at September 30, 2009) with a broad range of value added services including cellular and landline telephony, roaming services for tourists in Israel and for its subscribers abroad and additional services in the areas of music, video, mobile office etc., based on Cellcom Israel's technologically advanced infrastructure. The Company operates an HSPA 3.5 Generation network enabling advanced high speed broadband multimedia services, in addition to GSM/GPRS/EDGE and TDMA networks. Cellcom Israel offers Israel's broadest and largest customer service infrastructure including telephone customer service centers, retail stores, and service and sale centers, distributed nationwide. Through its broad customer service network Cellcom Israel offers its customers technical support, account information, direct to the door parcel services, internet and fax services, dedicated centers for the hearing impaired, etc. As of 2006, Cellcom Israel, through its wholly owned subsidiary Cellcom Fixed Line Communications L.P., provides landline telephone communication services in Israel, in addition to data communication services. Cellcom Israel's shares are traded both on the New York Stock Exchange (CEL) and the Tel Aviv Stock Exchange (CEL). For additional information please visit the Company's website http://www.cellcom.co.il
Forward-Looking Statements
The following information contains, or may be deemed to contain forward-looking statements (as defined in the U.S. Private Securities Litigation Reform Act of 1995 and the Israeli Securities Law, 1968). In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial results, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause such differences include, but are not limited to: changes to the terms of our license, new legislation or decisions by the regulator affecting our operations, the outcome of legal proceedings to which we are a party, particularly class action lawsuits, our ability to maintain or obtain permits to construct and operate cell sites, and other risks and uncertainties detailed from time to time in our filings with the U.S. Securities and Exchange Commission, including under the caption "Risk Factors" in our Annual Report for the year ended December 31, 2008.
Although we believe the expectations reflected in the forward-looking statements contained herein are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We assume no duty to update any of these forward-looking statements after the date hereof to conform our prior statements to actual results or revised expectations, except as otherwise required by law.
The Company prepares its financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). Unless noted specifically otherwise, the dollar denominated figures were converted to US$ using a convenience translation based on the US$\New Israeli Shekel (NIS) conversion rate of NIS 3.758 = US$ 1 as published by the Bank of Israel on September 30, 2009.
Use of non-GAAP financial measures
EBITDA is a non-GAAP measure and is defined as income before financing income (expenses), net; other income (expenses), net; income tax; depreciation and amortization. This is an accepted measure in the communications industry. The Company presents this measure as an additional performance measure as the Company believes that it enables us to compare operating performance between periods and companies, net of any potential differences which may result from differences in capital structure, taxes, age of fixed assets and related depreciation expenses. EBITDA should not be considered in isolation, or as a substitute for operating income, any other performance measures, or cash flow data, which were prepared in accordance with Generally Accepted Accounting Principles as measures of profitability or liquidity. EBITDA does not take into account debt service requirements, or other commitments, including capital expenditures, and therefore, does not necessarily indicate the amounts that may be available for the Company's use. In addition, EBITDA may not be comparable to similarly titled measures reported by other companies, due to differences in the way these measures are calculated. See the reconciliation between the net income and the EBITDA presented at the end of this Press Release.
Free cash flow is a non-GAAP measure and is defined as the net cash provided by operating activities minus the net cash used in investing activities plus short-term investment in marketable debentures. See the reconciliation note at the end of this Press Release.
Financial Tables Follow
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Balance Sheets
Convenience
translation
into US
dollar
September 30, September September December
30, 30, 31,
2009 2009 *2008 *2008
NIS millions US$ NIS NIS
millions millions millions
(Unaudited) (Unaudited) (Unaudited) (Audited)
Assets
Cash and cash equivalents 976 260 195 275
Current investments, including
derivatives 213 57 **72 **68
Trade receivables 1,584 421 1,503 1,478
Other receivables 73 19 **59 **44
Inventory 123 33 137 119
Total current assets 2,969 790 1,966 1,984
Trade and other receivables 622 165 610 602
Property, plant and equipment, net 2,066 550 2,186 2,159
Intangible assets, net 707 188 739 743
Total non- current assets 3,395 903 3,535 3,504
Total assets 6,364 1,693 5,501 5,488
Liabilities
Debentures current maturities 341 91 331 329
Trade payables and accrued
expenses 788 210 708 677
Current tax liabilities 127 34 84 85
Provisions 78 20 77 47
Other current liabilities,
including derivatives 345 92 319 385
Total current liabilities 1,679 447 1,519 1,523
Debentures 4,179 1,112 3,417 3,401
Provisions 17 5 15 17
Other long-term liabilities 1 - 1 1
Deferred taxes 99 26 141 156
Total non- current liabilities 4,296 1,143 3,574 3,575
Total liabilities 5,975 1,590 5,093 5,098
Shareholders' equity
Share capital 1 - 1 1
Cash flow hedge reserve (24) (6) (44) (11)
Retained earnings 412 109 451 400
Total shareholders' equity 389 103 408 390
Total liabilities and
shareholders' equity 6,364 1,693 5,501 5,488
(*) Retrospective application due to accounting policy change regarding
"Subscriber Acquisition and Retention Costs"
(**) Reclassified
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Statements of Income
Nine- month period ended Three-month
period ended
September 30, September 30,
Convenience Convenience
translation translation
into US into US
dollar dollar
2009 2009 *2008 2009
NIS US$ NIS NIS
millions millions millions millions
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues 4,844 1,289 4,845 1,675
Cost of
revenues 2,486 662 2,549 856
Gross profit 2,358 627 2,296 819
Selling and
marketing
expenses 520 138 521 185
General and
administrative
expenses 485 129 491 166
Other (income)
expenses, net 4 1 (16) -
Operating
income 1,349 359 1,300 468
Financing
income 141 37 94 29
Financing
expenses (302) (80) (357) (151)
Financing
expenses, net (161) (43) (263) (122)
Income before 1,188 316 1,037 346
income tax
Income tax 277 74 291 57
Net income 911 242 746 289
Earnings per
share
Basic earnings
per share in
NIS 9.26 2.46 7.64 2.94
Diluted
earnings per
share in NIS 9.17 2.44 7.52 2.91
(table continued)
Three- month period ended Year
ended
September 30, December
31,
Convenience
translation
into US
dollar
2009 *2008 *2008
US$ NIS NIS
millions millions millions
(Unaudited) (Unaudited) (Audited)
Revenues 446 1,650 6,417
Cost of
revenues 228 852 3,396
Gross profit 218 798 3,021
Selling and
marketing
expenses 49 188 701
General and
administrative
expenses 44 164 659
Other (income)
expenses, net - 2 (29)
Operating
income 125 444 1,690
Financing
income 7 14 83
Financing
expenses (40) (123) (393)
Financing
expenses, net (33) (109) (310)
Income before 92 335 1,380
income tax
Income tax 15 93 391
Net income 77 242 989
Earnings per
share
Basic earnings
per share in
NIS 0.78 2.48 10.12
Diluted
earnings per
share in NIS 0.77 2.44 9.96
(*) Retrospective application due to accounting policy change regarding
"Subscriber Acquisition and Retention Costs"
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Statements of Cash Flows
Nine-month period ended Three-month period ended
September 30, September 30,
Convenience Convenience
translation translation
into US into US
dollar dollar
2009 2009 *2008 2009
NIS millions US$ millions NIS millions NIS millions
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash flows
from
operating
activities
Net income
for the
period 911 242 746 289
Adjustments
to reconcile
net income
to funds
generated
from
operations:
Depreciation 353 94 428 115
Amortization 213 57 182 72
Capital gain
on sale of
land - - (9) -
Loss (gain)
on sale of
assets 5 1 (6) 1
Income tax
expense 277 74 291 57
Financial
(income)
costs, net 161 43 263 122
Share based
payments 1 - 20 1
Changes in
operating
assets and
liabilities:
Changes in
inventories (57) (15) 40 (29)
Changes in
trade
receivables
(including
long-term
amounts) (85) (23) (163) (34)
Changes in
other
receivables
(including
long-term
amounts) (45) (12) (44) 43
Changes in
trade
payables and
accrued
expenses 182 49 (175) 58
Changes in
other
liabilities
(including
long-term
amounts) (4) (1) 77 5
Proceeds
(payments)
for
inventory
hedging
contracts,
net 22 6 (34) 5
Proceeds
(payments)
for
derivative
contracts,
net 19 5 (8) (15)
Income tax
paid (290) (77) (355) (101)
Net cash
provided by
operating
activities 1,663 443 1,253 589
(table continued)
Three-month period ended Year ended
September 30, December
31,
Convenience
translation
into US
dollar
2009 *2008 *2008
US$ millions NIS millions NIS
millions
(Unaudited) (Unaudited) (Audited)
Cash flows
from
operating
activities
Net income
for the
period 77 242 989
Adjustments
to reconcile
net income
to funds
generated
from
operations:
Depreciation 31 142 570
Amortization 19 65 251
Capital gain
on sale of
land - - (9)
Loss (gain)
on sale of
assets - 2 (9)
Income tax
expense 15 93 391
Financial
(income)
costs, net 33 109 310
Share based
payments - 3 28
Changes in
operating
assets and
liabilities:
Changes in
inventories (8) (11) 36
Changes in
trade
receivables
(including
long-term
amounts) (9) (50) (117)
Changes in
other
receivables
(including
long-term
amounts) 12 (2) (34)
Changes in
trade
payables and
accrued
expenses 16 93 (271)
Changes in
other
liabilities
(including
long-term
amounts) 1 43 99
Proceeds
(payments)
for
inventory
hedging
contracts,
net 1 (14) (38)
Proceeds
(payments)
for
derivative
contracts,
net (4) (4) 18
Income tax
paid (27) (95) (451)
Net cash
provided by
operating
activities 157 616 1,763
(*) Retrospective application due to accounting policy
change regarding "Subscriber Acquisition and Retention Costs"
Cellcom Israel Ltd.
(An Israeli Corporation)
Condensed Consolidated Statements of Cash Flows (cont'd)
Three-month
Nine-month period ended period ended
September 30, September 30,
Convenience Convenience
translation translation
into US into US
dollar dollar
2009 2009 *2008 2009
NIS US$ NIS NIS
millions millions millions millions
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cash flows
from
investing
activities
Acquisition
of property,
plant, and
equipment (285) (76) (323) (89)
Acquisition
of
intangible
assets (137) (37) (129) (48)
Change in
current
investments,
net (124) (33) - (124)
Payments for
derivative
hedging
contracts,
net - - (17) -
Proceeds
from sales
of property,
plant, and
equipment 2 1 13 2
Interest
received 4 1 15 -
Proceeds
from sale of
long term
assets - - 39 -
Net cash
used in
investing
activities (540) (144) (402) (259)
Cash flows
from
financing
activities
Proceeds
from
derivative
contracts,
net 9 2 17 5
Repayment of
long-term
loans from
banks - - (648) -
Repayment of
Debentures (332) (88) (125) (168)
Proceeds
from
issuance of
debentures,
net of
issuance
costs 989 263 589 -
Dividend
paid (898) (239) (1,225) (302)
Interest
paid (190) (50) (175) (112)
Net cash
provided by
(used in)
financing
activities (422) (112) (1,567) (577)
Changes in
cash and
cash
equivalents 701 187 (716) (247)
Balance of
cash and
cash
equivalents
at beginning
of the
period 275 73 911 1,223
Balance of
cash and
cash
equivalents
at end of
the period 976 260 195 976
(table continued)
Three-month period ended Year ended
September 30, December 31,
Convenience
translation
into US
dollar
2009 *2008 *2008
US$ NIS millions NIS millions
millions
(Unaudited) (Unaudited) (Audited)
Cash flows
from
investing
activities
Acquisition
of property,
plant, and
equipment (24) (98) (429)
Acquisition
of
intangible
assets (13) (35) (175)
Change in
current
investments,
net (33) - -
Payments for
derivative
hedging
contracts,
net - (7) (17)
Proceeds
from sales
of property,
plant, and
equipment 1 - 19
Interest
received - 2 17
Proceeds
from sale of
long term
assets - 2 39
Net cash
used in
investing
activities (69) (136) (546)
Cash flows
from
financing
activities
Proceeds
from
derivative
contracts,
net 1 2 31
Repayment of
long-term
loans from
banks - - (648)
Repayment of
Debentures (44) (125) (125)
Proceeds
from
issuance of
debentures,
net of
issuance
costs - - 589
Dividend
paid (80) (270) (1,525)
Interest
paid (30) (87) (175)
Net cash
provided by
(used in)
financing
activities (153) (480) (1,853)
Changes in
cash and
cash
equivalents (65) - (636)
Balance of
cash and
cash
equivalents
at beginning
of the
period 325 195 911
Balance of
cash and
cash
equivalents
at end of
the period 260 195 275
(*) Retrospective application due to accounting policy change regarding
"Subscriber Acquisition and Retention Costs"
Cellcom Israel Ltd.
(An Israeli Corporation)
Reconciliation for Non-GAAP Measures
EBITDA
The following is a reconciliation of net income to EBITDA:
Year
ended
Three-month period ended
December
September 30, 31,
Convenience
translation
into US
dollar
2009 2008 2008
2009
NIS NIS NIS
millions US$ millions millions millions
Net income.................... 289 77 242 989
Income taxes................... 57 15 93 391
Financing income............. (29) (8) (14) (83)
Financing expenses............ 151 40 123 393
Other expenses (income)........ - - 2 (29)
Depreciation and amortization 187 50 207 821
EBITDA........................ 655 174 653 2,482
Free cash flow
The following table shows the calculation of free cash flow:
Year
ended
Three-month period ended
December
September 30, 31,
Convenience
translation
into US
dollar
2009 2008 2008
2009
NIS NIS NIS
millions US$ millions millions millions
Cash flows from operating
activities.................... 589 157 616 1,763
Cash flows from investing
activities.................. (259) (69) (136) (546)
short-term Investment in
marketable debentures......... 124 33 - -
Free cash flow................ 454 121 480 1,217
[1] Please see "Use of Non-GAAP financial measures" section at the end of this press release.
[2] Following the change in accounting policy in the second quarter of 2009 regarding recognition of certain subscriber acquisition and retention costs for capitalization, comparison data for third quarter 2008 was changed to reflect the retrospective application of that change.
[3] After elimination of a one-time provision in the amount of NIS 15 million. Without elimination of this one-time provision, EBITDA increased 0.3% and totaled NIS 655 million and EBITDA margin totaled 39.1%. See "Cost of revenues" section in this press release.
[4] Net income includes a one-time provision in the amount of NIS 11 million (after tax) and a one-time tax income in the amount of NIS 41 million. After elimination of these one-time effects, net income increased 7%. See "Cost of revenues" and "Income tax" sections in this press release.
[5] Following the change in accounting policy in the second quarter of 2009 regarding recognition of certain subscriber acquisition and retention costs for capitalization, comparison data for third quarter 2008 was changed to reflect the retrospective application of that change.
Company Contact
Yaacov Heen
Chief Financial Officer
investors@cellcom.co.il
Tel: +972-52-998-9755
Investor Relations Contact
Ehud Helft / Ed Job
CCGK Investor Relations
ehud@gkir.com / ed.job@ccgir.com
Tel: (US) +1-866-704-6710 / +1-646-213-1914
SOURCE Cellcom Israel Ltd.
