Cellcom Israel Announces First Quarter 2011 Results
Cellcom Israel Presents a Slight Increase in Total Revenues and EBITDA[1]
NETANYA, Israel, May 16, 2011 /PRNewswire-FirstCall/ --
Operating Income Increased 3.1%
This Quarter Reflects the Initial Impact of the Regulatory Changes
Cellcom Israel Declares a First Quarter Dividend of NIS 2.93 per Share (Totals Approx. NIS 291 Million)
First Quarter 2011 Highlights (compared to the first quarter 2010):
- Total Revenues increased 0.4% to NIS 1,587 million ($456 million)
- Total Revenues from services decreased 14.8% to NIS 1,205 million ($346 million) as a result of the regulatory changes
- Revenues from content and value added services (including SMS) increased 13.5%, reaching 23.7% of services revenues
- EBITDA increased 0.2% to NIS 639 million ($184 million); EBITDA margin 40.3%
- Operating income increased 3.1% to NIS 471 million ($135 million)
- Net income totaled NIS 306 million ($88 million), a 2.5% decrease, attributed to the increase in financing expenses, net, resulted from the increased inflation
- Free cash flow(1) increased 3.6% to NIS 401 million ($115 million)
- Subscriber base reached approx. 3.395 million at the end of March 2011, net addition of approx. 1,000 in the first quarter, following a decrease in the number of subscribers with more than one subscription to a cellular network, or double counted subscribers, and inactive subscribers as a result of the regulatory change
- 3G subscribers reached approx. 1.188 million at the end of March 2011, representing 35% of total subscriber base, net addition of approx. 48,000 in the first quarter 2011
- The Company Declared first quarter dividend of NIS 2.93 per share
Cellcom Israel Ltd. (NYSE: CEL TASE: CEL) ("Cellcom Israel", the "Company"), announced today its financial results for the first quarter of 2011. Revenues for the first quarter 2011 totaled NIS 1,587 million ($456 million); EBITDA for the first quarter 2011 totaled NIS 639 million ($184 million), or 40.3% of total revenues; and net income for the first quarter 2011 totaled NIS 306 million ($88 million). Basic earnings per share for the first quarter 2011 totaled NIS 3.09 ($0.89).
Commenting on the results, Amos Shapira, Chief Executive Officer said, "In the first quarter of 2011, Cellcom Israel presented a slight increase in total revenues and EBITDA. This quarter we witnessed the initial impact of the regulatory changes, some of which came into effect at the beginning of the quarter and some during the quarter. Service revenues decreased by approximately 15%, due to the reduction of interconnect fees. The average monthly revenue per user (ARPU) also decreased for the same reason. In light of the regulatory changes and the accelerated competition, which led to a material increase in the Company's gross recruitment of subscribers, we presented a 130% increase in revenues from handsets and accessories. Furthermore, we presented a 13.5% increase in revenues from content and value added services, and a 3.1% increase in operating income. As mentioned, the regulatory changes affected our revenues, but also increased our operating expenses, mainly customer service and retention expenses. These effects were offset by our efforts to increase revenues on the one hand, and by our efficiency measures on the other hand. Notwithstanding the increase in operating income, our net income decreased by 2.5% due to an increase in financing expenses, resulting from the increased inflation in the first quarter this year compared with the first quarter last year.
Following the regulatory changes, during the first quarter we experienced a significant increase in the number of customers' queries to our sales and service centers, a material increase in our gross recruitment of subscribers, and at the same time a material increase in our churn rate. As we previously noted, the reduction of early termination fees in calling plans with commitment for a certain period, led to a decrease of double counted and inactive subscribers in the market, which offset a considerable part of our gross recruitment of new subscribers and caused our net additions to be lower than in previous quarters. However, we increased our 3G subscriber base by approximately 48,000 net new 3G subscribers, reaching 1.188 million subscribers and representing 35% of our total subscriber base. I'm pleased with our quarterly results in light of the changes in the market, although the stabilization process to the new market conditions has not ended yet.
Since the start of 2011, we launched a series of initiatives in order to improve transparency to customers and to simplify the way we charge our subscribers for various services, including the launch of an innovative pricing model of unlimited surfing packages in a variety of surfing speeds, the cancellation of 3G usage fee, the launch of marketing plans without a commitment for a certain period and the launch of roaming services packages with attractive tariffs.
Following our previous announcement with regard to a potential merger with Netvision and after Netvision notified us of its decision to enter into negotiations with us in this matter, both companies have begun the negotiations." As previously noted, the transaction is subject to various conditions and there is no assurance that it will be eventually completed.
Yaacov Heen, Chief Financial Officer, commented: "In this quarter, we raised additional debt, as the capital market demonstrated a great trust in us, reflected both in the high demand for our debentures and in the attractive interest rate which was set. These debentures were issued under a shelf offering report, after Standard & Poor's Maalot reaffirmed the ilAA/stable rating of our debentures. It is worth noting, that this debenture issuance was effected at the lowest interest rates for the Company's debentures to date.
In the first quarter, we continued to generate a strong free cash flow which totaled NIS 401 million. The Company will distribute a dividend of approximately NIS 291 million, representing approximately 95% of our net income for the first quarter to our shareholders.
The regulatory changes (a portion of which came into effect only during the quarter), which led to accelerated competition, affected only part of the first quarter this year and therefore, during this quarter we saw only part of the impact of these changes. We estimate that the full effects of the reduction of early termination fees and the price erosion on our service revenues and profitability will be seen mainly in the coming quarters. Furthermore, increased sale of handsets is expected to cause an increase in the immediate payment to vendors for handset purchases, as opposed to spreading the proceeds from those sales, that are paid in installments (generally in 36 installments), which will decrease our free cash flow."
Main Financial and Performance Indicators: Q1/2011 Q1/2010 % Change Q1/2011 Q1/2010 million NIS million US$ (convenience translation) Total revenues 1,587 1,580 0.4% 455.9 453.9 Total Services revenues (including revenues from content and value added services) 1,205 1,414 (14.8%) 346.2 406.2 Revenues from content and value added services 285 251 13.5% 81.9 72.1 Handset and accessories revenues 382 166 130.1% 109.7 47.7 Operating Income 471 457 3.1% 135.3 131.3 Net Income 306 314 (2.5%) 87.9 90.2 Free cash flow 401 387 3.6% 115.2 111.2 EBITDA 639 638 0.2% 183.6 183.3 EBITDA, as percent of Revenues 40.3% 40.4% (0.2%) Subscribers end of period (in thousands) 3,395 3,313 2.5% Monthly ARPU 115.2 139.1 (17.2%) 33.1 40.0 Average Monthly MOU 334 328 1.8%
Financial Review
Revenues for the first quarter of 2011 totaled NIS 1,587 million ($456 million), a 0.4% increase compared to NIS 1,580 million ($454 million) in the first quarter last year. The slight increase in revenues resulted from a 130% increase in handset and accessories revenues, from NIS 166 million ($48 million) in the first quarter last year, to NIS 382 million ($110 million) in the first quarter of 2011, most of which was offset by a decrease of approximately 15% in service revenues, a result of the regulatory changes, from NIS 1,414 million ($406 million) in the first quarter of 2010 to NIS 1,205 million ($346 million) in the first quarter of 2011.
The increase in handset and accessories revenues was due to an increase in the number of handsets sold during the first quarter of 2011 compared to the first quarter last year, as well as a change in the mix of handsets sold, in favor of smartphones and advanced 3G handsets. The increase in the number of handsets sold resulted from the accelerated competition following the regulatory changes. The decrease in service revenues resulted mainly from a significant decrease in interconnect fees paid to us by other local operators, due to the reduction in interconnect tariffs as of January 1, 2011, as well as from the ongoing airtime price erosion, due to the increased competition in the market. The decrease in service revenues was partially offset by an increase of approximately 13.5% in content and value added services (including SMS) revenues in the first quarter 2011, compared to the first quarter last year. Revenues from content and value added services for the first quarter 2011 reached NIS 285 million ($82 million), or 23.7% of service revenues.
Cost of revenues for the first quarter of 2011 totaled NIS 750 million ($216 million), a 6.2% decrease from NIS 801 million ($230 million) in the first quarter last year. This decline primarily resulted from a significant decrease in total interconnect fees paid to other local cellular operators following the reduction in interconnect tariffs as of January 1, 2011. The decrease in cost of revenues also resulted from a decrease in amortization expenses, attributed, among others, to capitalized handsets subsidies, due to a significant decrease in such subsidies. These decreases were partially offset by a significant increase in handsets cost resulted mainly from an increase in the number of handsets sold during the first quarter of 2011 compared to the first quarter last year, as well as from a change in the mix of handsets sold, in favor of smartphones and advanced 3G handsets.
Gross profit for the first quarter of 2011 increased 7.3% reaching NIS 837 million ($240 million), compared to NIS 779 million ($224 million) in the first quarter of 2010. Gross profit margin for the first quarter 2011 increased to 52.7% from 49.3% in the first quarter last year.
Selling, Marketing, General and Administrative Expenses ("SG&A Expenses") for the first quarter of 2011 totaled NIS 366 million ($105 million), compared to NIS 322 million ($93 million) in the first quarter last year. The increase in SG&A Expenses reflects primarily the impact of the regulatory changes, resulting in an increase in the number of customers' queries to our sales and service centers, which led to an increase in the Company's sales and customer service force leading to an increase in payroll expenses, as well as an increase in sales commissions. The increase in sales commissions also resulted from ceasing the capitalization of these commissions due to the absence of the required accounting conditions for such capitalization, following the regulatory change in relation to the reduction of early termination fees. Furthermore, the acquisition of Dynamica in the second quarter of 2010, also contributed to the increase in payroll and rent expenses in the first quarter this year compared with the first quarter last year.
Operating income for the first quarter 2011 increased 3.1%, reaching NIS 471 million ($135 million), compared to NIS 457 million ($131 million) in the first quarter last year.
EBITDA for the first quarter 2011 increased 0.2% to NIS 639 million ($184 million), compared to NIS 638 million ($183 million) in the first quarter of 2010. EBITDA as a percent of total revenues, totaled 40.3%, a slight decrease from 40.4% in the first quarter last year.
Financing expenses, net for the first quarter 2011 totaled NIS 67 million ($19 million), compared to NIS 36 million ($10 million) in the first quarter last year. The increase resulted mainly from Israeli Consumer Price Index (CPI) linkage expenses, associated with the Company's debentures, in the first quarter of 2011, compared to income from CPI linkage in the first quarter of 2010, due to a 1.1% inflation in the first quarter this year, compared to a 1% deflation in the first quarter last year. This increase was offset in part by a gain from CPI hedging transactions in the first quarter 2011, compared to a loss from CPI hedging transactions in the first quarter last year.
Net Income for the first quarter 2011 totaled NIS 306 million ($88 million), compared to NIS 314 million ($90 million) in the first quarter last year. This decrease resulted from the higher financing expenses. Basic earnings per share for the first quarter 2011 totaled NIS 3.09 ($0.89), compared to NIS 3.18 ($0.91) in the first quarter 2010.
Operating Review
New Subscribers - at the end of March 2011 the Company had approximately 3.395 million subscribers. During the first quarter of 2011 the Company added approximately 1,000 net new subscribers. The regulatory change regarding the reduction of early termination fees, led to a reduction of double counted and inactive subscribers, who prior to the change, remained part of our subscriber base until they were deducted after 6 months of being inactive. We believe that this phenomenon is not over yet. The reduction in the double counted and inactive subscribers offset a material part of the increase in our gross recruitment of new subscribers.
In the first quarter of 2011, the Company added approximately 48,000 net new 3G subscribers to its 3G subscriber base, reaching approximately 1.188 million 3G subscribers at the end of March 2011, representing 35% of the Company's total subscriber base, an increase from the 31.3% 3G subscribers represented of total subscribers at the end of March 2010.
The Churn Rate in the first quarter 2011 was 7.1%, compared to 5.4% in the first quarter last year. The increase in the churn in the first quarter of 2011 resulted from the intensified competition and the regulatory change regarding the reduction in early termination fees, enabling subscribers to terminate a contract with a commitment for a certain period by paying a negligible amount of early termination fee without having to wait to the end of the commitment period, which led to a reduction of double counted and inactive subscribers. Furthermore, the churn for both quarters was impacted by the churn of pre-paid subscribers, characterized by lower contribution, and subscribers with collection problems.
Average monthly subscriber Minutes of Use ("MOU") in the first quarter 2011 totaled 334 minutes, compared to 328 minutes in the first quarter 2010, an increase of 1.8%.
The monthly Average Revenue per User (ARPU) for the first quarter 2011 decreased 17.2% and totaled NIS 115.2 ($33.1), compared to NIS 139.1 ($40.0) in the first quarter last year. The decrease is attributed to the reduction in interconnect tariffs and to the ongoing airtime price erosion.
Financing and Investment Review
Cash Flow
Free cash flow for the first quarter of 2011 totaled NIS 401 million ($115 million), compared to NIS 387 million ($111 million) generated in the first quarter of 2010. Cash flows from operating activities for the first quarter this year decreased ,compared with the first quarter last year, following the regulatory changes, which led to a decrease in service revenues. Cash flows from investing activities decreased in the first quarter this year compared to the first quarter last year, as a result of a difference in timing of investments between the quarters. The increase in free cash flow resulted from a higher decrease in cash flows from investing activities than the decrease in cash flows from operating activities.
Shareholders' Equity
Shareholders' Equity as of March 31, 2011 amounted to NIS 344 million ($99 million), primarily consisting of accumulated undistributed retained earnings.
Investment in Fixed Assets and Intangible Assets
During the first quarter 2011, the Company invested NIS 73 million ($21 million) in fixed assets and intangible assets (including, among others, investments in information systems and software), compared to NIS 137 million ($39 million) in the first quarter 2010. The decrease resulted from the decrease in capitalization of handsets subsidies and sales commissions due to the regulatory change relating to early termination fees, as well as from a difference in timing of investments between the quarters.
Dividend
On May 15, 2011, the Company's board of directors declared a cash dividend in the amount of NIS 2.93 per share, and in the aggregate amount of approximately NIS 291 million (the equivalent of approximately $0.84 per share and approximately $83 million in the aggregate, based on the representative rate of exchange on May 12, 2011; The actual US$ 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 July 5, 2011), subject to withholding tax described below. 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 June 22, 2011. The payment date will be July 7, 2011. 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 first quarter of 2011 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, 2010 on Form 20-F, under "Item 8 - Financial Information - Dividend Policy".
Other developments during the first quarter of 2011 and subsequent to the end of the reporting period
Netvision
Following the Company's previous announcement that it has approached Netvision Ltd., or Netvision, with a proposal to negotiate a merger between the Company's subsidiary and Netvision, in March 2011, Netvision notified the Company of its decision to enter such negotiations with the Company. The parties have begun negotiations. Consummation of the transaction is subject to various conditions and the Company can provide no assurances that it will enter into any transaction.
For details on the proposed merger transaction with Netvision and the conditions for its consummation see the Company's most recent annual report on Form 20-F for the year ended December 31, 2010, under "Item 5. Operating Results - Overview - Recent Developments".
New UMTS operators
Following the UMTS spectrum tender for two additional UMTS operators published by the Ministry of Communications in September 2010, in April 2011, Mirs Communications Ltd. (an existing cellular operator), and Marathon Mobile X Ltd. (controlled by an Israeli businessman, also controlling a small international landline operator), have won the tender. Each of the winners has committed to pay license fees in the amount of approximately NIS 700 million after the lapse of 5 years (of which a minimal license fee in the amount of NIS 10 million shall be paid immediately and the remaining amount shall be guaranteed during that period by a bank guarantee) and reduced to a minimal license fee of NIS 10 million by one seventh of the sum, for each 1 percentage of market share gained by the winners in the private sector.
For additional details see the Company's most recent annual report on Form 20-F for the year ended December 31, 2010, 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 - Government Regulations - Additional UMTS Operators".
Issuance of Debentures
In March 2011, the Company issued additional debentures from the Company's existing Series D in a principal amount of NIS 294,347,000 at the price of NIS 1,300.5 per unit (each unit comprised of NIS 1,000 principal amount), representing an effective interest rate of 2.23% per annum, linked to the Israeli Consumer Price Index, or CPI; the interest rate of this series is fixed at 5.19% per annum, linked to the Israeli CPI.
The Company also issued additional debentures from the Company's existing Series E in a principal amount of NIS 632,295,000, at the price of NIS 1,040.5 per unit (each unit comprised of NIS 1,000 principal amount), representing an effective interest rate of 5.47% per annum; the interest rate of this series is fixed at 6.25% per annum, without linkage.
The debentures (rated ilAA/Stable) were issued in a public offering in Israel based on the Company's Israeli 2009 shelf prospectus and were listed for trading on the Tel Aviv Stock Exchange.
The total consideration received by the Company is approximately NIS 1.041 billion.
The Company intends to use the net proceeds from such offering for partial financing of the proposed merger transaction with Netvision Ltd. (if executed) and general corporate purposes, which may include financing its operating and investment activity, refinancing of outstanding debt under its debentures, and continued dividend distributions as customary in the Company, subject to the decisions of the Company's board of directors from time to time.
For additional details of the Company's Israeli 2009 shelf prospectus and public debentures, see the Company's annual report for the year ended December 31, 2010 on Form 20-F, under "Item 5 - Operating and Financial Review and Prospects - B. Liquidity and Capital Resources - Debt Service"; for details on the proposed merger transaction with Netvision see under "Item 5. Operating Results - Overview - Recent Developments" and see "Netvision" in this report above; for details of the Company's dividend policy under "Item 8. Financial Information - A. Consolidated Statements and Other Financial Information - Dividend Policy"; and the Company's current reports on Form 6-K filed on March 21, 2011, March 24, 2011, March 28, 2011 and March 30, 2011 regarding the Company's debt raising.
2006 Share Incentive Plan
In May 2011, our board of directors resolved to enlarge the initial pool of options or restricted stock units, or RSUs, of the Company's 2006 Share Incentive Plan, or the Plan, by 1.4 million options or RSUs and to grant 1.06 million additional options to certain non director officers and senior employees, out of which 315 thousand options to our CEO, at an exercise price of US$ 31.74 per share. The options granted will be vested in 3 equal installments on each of the first, second and third anniversary of the date of the grant. The options of the first installment may be exercised within 24 months from their vesting and the second and third installments may be exercised with 18 month from their vesting.
Our board of directors further amended the Plan so that the definition of corporate transactions triggering accelerated vesting of the options/RSUs, will include sale or other disposition of all or substantially all of our outstanding shares rather than Discount Investment Company Ltd. (our controlling shareholder) ceasing to control.
For additional details see the Company's annual report for the year ended December 31, 2010 on Form 20-F, under "Item 6 - Directors, Senior Management and Employees - Share Ownership - 2006 Share Incentive Plan".
Conference Call Details
The Company will be hosting a conference call on Monday, May 16, 2011 at 10:00 am ET, 7:00 am PT, 15:00 UK time, 17:00 Israel 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: 0-800-917-9141
Israel Dial-in Number: 03 918 0610 International Dial-in Number: +972-3-918-0610
at: 10:00 am ET; 07:00 am PT; 15:00 UK Time; 17:00 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 3.395 million subscribers (as at March 31, 2011) 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 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, 2010.
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$\New Israeli Shekel (NIS) conversion rate of NIS 3.481 = US$ 1 as published by the Bank of Israel on March 31, 2011.
Use of non-IFRS financial measures
EBITDA is a non-IFRS 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 IFRS 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-IFRS 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 tradable debentures. See the reconciliation note at the end of this Press Release.
Financial Tables Follow Cellcom Israel Ltd. (An Israeli Corporation) Condensed Consolidated Statements of Financial position Convenience translation into US dollar March 31, March 31, March 31, December 31, 2011 2011 2010 2010 NIS millions US$ NIS millions NIS millions millions (Unaudited) (Unaudited) (Unaudited) (Audited) Assets Cash and cash equivalents 1,644 472 618 533 Current investments, including derivatives 400 115 383 404 Trade receivables 1,495 430 1,554 1,478 Other receivables 65 19 71 64 Inventory 123 35 134 104 Total current assets 3,727 1,071 2,760 2,583 Trade and other receivables 710 204 584 597 Property, plant and equipment, net 2,017 579 2,060 2,063 Intangible assets, net 704 202 704 753 Total non- current assets 3,431 985 3,348 3,413 Total assets 7,158 2,056 6,108 5,996 Liabilities Debentures current maturities 590 169 344 348 Trade payables and accrued expenses 790 227 718 716 Current tax liabilities 89 25 83 132 Provisions 87 25 87 84 Other current liabilities, including derivatives 339 97 364 379 Dividend declared 303 87 - - Total current liabilities 2,198 630 1,596 1,659 Debentures 4,536 1,303 3,983 3,913 Provisions 16 5 17 17 Other long-term liabilities 2 1 1 1 Deferred taxes 62 18 81 65 Total non- current liabilities 4,616 1,327 4,082 3,996 Total liabilities 6,814 1,957 5,678 5,655 Shareholders' equity Share capital 1 - 1 1 Cash flow hedge reserve (21) (6) (24) (21) Retained earnings 364 105 453 361 Total shareholders' equity 344 99 430 341 Total liabilities and shareholders' equity 7,158 2,056 6,108 5,996 Cellcom Israel Ltd. (An Israeli Corporation) Condensed Consolidated Statements of Income Three- month period ended Year ended March 31, December 31, Convenience translation into US dollar 2011 2011 2010 2010 NIS millions US$ NIS millions NIS millions millions (Unaudited) (Unaudited) (Unaudited) (Audited) Revenues 1,587 456 1,580 6,662 Cost of revenues (750) (216) (801) (3,322) Gross profit 837 240 779 3,340 Selling and marketing expenses (209) (60) (163) (756) General and administrative expenses (157) (45) (159) (641) Other expenses, net - - - (5) Operating income 471 135 457 1,938 Financing income 19 6 23 106 Financing expenses (86) (25) (59) (336) Financing income (expenses), net (67) (19) (36) (230) Income before income tax 404 116 421 1,708 Income tax (98) (28) (107) (417) Net income 306 88 314 1,291 Earnings per share Basic earnings per share in NIS 3.09 0.89 3.18 13.04 Diluted earnings per share in NIS 3.09 0.89 3.16 12.98 Cellcom Israel Ltd. (An Israeli Corporation) Condensed Consolidated Statements of Cash Flows Three- month period ended Year ended March 31, December 31, Convenience translation into US dollar 2011 2011 2010 2010 NIS US$ NIS NIS millions millions millions millions (Unaudited) (Unaudited) (Unaudited) (Audited) Cash flows from operating activities Net income for the period 306 88 314 1,291 Adjustments for: Depreciation and Amortization 168 48 181 724 Share based payments - - - 1 Loss (gain) on sale of assets - - - 5 Income tax expense 98 28 107 417 Financial (income) expenses, net 67 19 36 230 Changes in operating assets and liabilities: Changes in inventories (19) (5) (5) - Changes in trade receivables (including long- term amounts) (117) (34) 76 172 Changes in other receivables (including long- term amounts) (4) (1) (25) (6) Changes in trade payables and accrued expenses 122 35 (34) (42) Changes in other liabilities (including long-term amounts) 18 5 6 (16) Proceeds (payments) for derivative hedging contracts, net (3) (1) (5) (16) Income tax paid (120) (34) (100) (380) Net cash from operating activities 516 148 551 2,380 Cash flows from investing activities Acquisition of property, plant, and equipment (82) (23) (105) (441) Acquisition of intangible assets (34) (10) (58) (180) Acquisition of operation - - - (108) Change in current investments, net 2 1 (138) (154) Proceeds (payments) for other derivative contracts, net (3) (1) (5) (17) Proceeds from sales of property, plant and equipment 1 - 1 2 Interest received 3 1 3 9 Net cash used in investing activities (113) (32) (302) (889) Cellcom Israel Ltd. (An Israeli Corporation) Condensed Consolidated Statements of Cash Flows (cont'd) Three- month period ended Year ended March 31, December 31, Convenience translation into US dollar 2011 2011 2010 2010 NIS US$ NIS NIS millions millions millions millions (Unaudited) (Unaudited) (Unaudited) (Audited) Cash flows from financing activities Proceeds from derivative contracts, net 4 1 13 34 Proceeds (payments) for short term borrowings - - (3) (8) Repayment of debentures (175) (50) (171) (343) Proceeds from issuance of debentures, net of issuance costs 1,033 297 - - Dividend paid (31) (9) (256) (1,319) Interest paid (123) (36) (117) (225) Net cash used in financing activities 708 203 (534) (1,861) Changes in cash and cash equivalents 1,111 319 (285) (370) Balance of cash and cash equivalents at beginning of the period 533 153 903 903 Balance of cash and cash equivalents at end of the period 1,644 472 618 533 Cellcom Israel Ltd. (An Israeli Corporation) Reconciliation for Non-IFRS Measures EBITDA The following is a reconciliation of net income to EBITDA: Year Three-month period ended ended March 31, December 31, Convenience translation into US dollar 2011 2011 2010 2010 NIS NIS millions US$ millions NIS millions millions (Unaudited) (Unaudited) (Unaudited) (Audited) Net income 306 88 314 1,291 Income taxes 98 28 107 417 Financing income (19) (6) (23) (106) Financing expenses 86 25 59 336 Other expenses (income) - - - 5 Depreciation and amortization 168 48 181 724 EBITDA 639 184 638 2,667 Free Cash Flow The following table shows the calculation of free cash flow: Year Three-month period ended ended March 31, December 31, Convenience translation into US dollar 2011 2011 2010 2010 NIS NIS millions US$ millions NIS millions millions (Unaudited) (Unaudited) (Unaudited) (Audited) Cash flows from operating activities 516 148 551 2,380 Cash flows from investing activities (113) (32) (302) (889) Short-term Investment in tradable debentures (2) (1) 138 154 Free Cash Flow 401 115 387 1,645 --------------------------------- [1] Please see "Use of Non-IFRS financial measures" section in this press release. Company Contact Yaacov Heen Chief Financial Officer [email protected] Tel: +972-52-998-9755 IR Contacts Porat Saar CCG Investor Relations Israel & US [email protected] Tel: +1-646-233-2161
SOURCE Cellcom Israel Ltd.
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