Company Reports Another Quarter of Record Operating Cash Flow PETACH TIKVA, Israel, August 13 /PRNewswire-FirstCall/ -- Internet Gold Golden Lines Ltd., (NASDAQ Global Market and TASE: IGLD) today reported its financial results for the second quarter of 2009. Highlights - Strong revenues and EBITDA: Second quarter revenues up 10% to NIS 309 million; adjusted EBITDA up16% to NIS 71 million. - Strong operating cash flow: NIS 58 million in Q2 2009. Net outstanding financial debt as of June 30, 2009 decreased by NIS 133 million from the beginning of 2009. - 012 Smile.Communications: Delivers excellent performance while continuing to investigate growth opportunities - Record performance in EBITDA and cash flow from operations - Broadband segment revenue increases by 14% - International long distance (ILD) business up year-over-year and quarter-over-quarter - Total of 120,000 local telephony lines as of the end of the quarter and continues to grow - Smile.Media continues to achieve stable growth in revenues, positive cash flow and bottom line profitability. - Share and bond buy-back programs continue. (in millions of NIS) Q2'09 Q2'08 Q1'09 vs. Q1'08 Revenues 309 281 10% Gross Profit 94 91 3% Operating Income 40 29 38% Adjusted EBITDA 71 61 16% Net Income (Loss) 23 (8) 288% Financial Results for the Second Quarter Revenues: Revenues for the second quarter of 2009 were NIS 309 million (US $79 million), a 10% increase compared with NIS 281 million in the second quarter of 2008. The increase in revenues reflects the results delivered by 012 Smile.Communications together with the modest contribution of Smile.Media. Adjusted EBITDA: Adjusted EBITDA for the second quarter of 2009 was NIS 71 million (US $18 million), a 16% increase compared with NIS 61 million for the second quarter of 2008. For more information regarding the use of non-GAAP financial measures, please see the notes in this press release. Financial Expenses (Income), Net: Financial income net, for the second quarter of 2009 totaled NIS 4.3 million (US $1.1 million) compared with NIS 32.6 million expenses in the second quarter of 2008. In the second quarter of 2009, the Company recorded NIS 16 million (US $4 million) of financial expenses associated with the decrease of the exchange rate of the US dollar against the NIS, and NIS 29 million (US $7.4 million) expenses associated with the company bond series. In addition, during the second quarter of 2009, the market price of certain of the Company's investments increased as a result of the global improvement in the capital markets. The Company has classified these investments as marketable securities and is required to mark these investments to market value. Net Results: On a U.S. GAAP basis, the Company recorded net income for the second quarter of 2009 of NIS 23.2 million (US $5.9 million), or NIS 1.26 (US $0.32) per share on a fully diluted basis. This compares to a net loss of NIS 8 million, or NIS 0.37 per share on a fully diluted basis for the second quarter of 2008. Capital Resources The Company's cash, cash equivalents and marketable securities as of June 30, 2009 were NIS 613 million (US $156 million). Total assets as of June 30, 2009 were NIS 1,969 million (U.S. $503 million) and total bank debt was NIS 36 million (U.S. $9.2 million). Shareholders' equity as of June, 30 2009 was NIS 419 million ($107 million), representing 21% of total assets. The Company's current ratio as of June, 30 2009 was 2.1, while the ratio of net debt to EBITDA was 1.2, which is within the target range established by management. Comments of Management Commenting on the results, Eli Holtzman, Internet Gold's CEO, said, "The second quarter was, again, a strong quarter for our group. The primary driver of our results remains our communications segment which has achieved superb operating results in all parameters as a leader in the Israeli communications market. 012 Smile continued to build its core business and expand its base of VOB domestic telephony subscribers. We are also pleased that our media segment presented an additional quarter of stable growth with net and operating profitability. In parallel, our strong cash position enhances the financial stability of our group, creating the strong platform we need to move forward with our growth strategy." Mr. Holtzman continued, "Taken as a whole, we are optimistic about new opportunities in our growing communication market and believe that we are in a good position to go after new opportunities, taking our company to the next level." Business Segments 012 Smile.Communications Ltd. (NASDAQ and TASE: SMLC): 012 Smile.Communications reported improved quarterly revenues of NIS 291 million (US $74 million) for the quarter ended June 30, 2009, compared to NIS 264 million for the same period in 2008, a 10% increase. Revenue from broadband services increased to NIS 150 million (US $38 million) for the quarter ended June 30, 2009 compared to NIS 132 million for the second quarter of 2008, an increase of 14%. Revenue from traditional voice services for the quarter was NIS 141 million (US $36 million) compared to NIS 132 million for the same period last year. Operating income for the second quarter of 2009 increased to NIS 41 million (US $10.5 million) compared with NIS 33 million for the same period last year. Operating income for the second quarter of 2009 benefited from a one-time gain of NIS 3.8 million (US $1 million) from a decrease in provision for contingent liabilities as a result of a change in the status of a legal dispute. Adjusted EBITDA for the second quarter of 2009 increased to a record NIS 71 million (US $18 million) compared with NIS 63 million for the same period last year. Smile.Media Ltd.: Smile.Media delivered another consecutive quarter of operating income and net income during the second quarter of 2009. The segment's revenues for the second quarter were NIS 18 million (US $4.6 million), derived primarily from its e-commerce businesses. The subsidiary's operating income for the second quarter of 2009 reached NIS 0.7 million (US $0.2 million) compared with a loss of NIS 2 million for the same period last year. Net income for quarter ended June 30, 2009 increased to NIS 0.3 million (US $85,000) compared to a loss, of NIS 3 million for the same period in 2008, Adjusted EBITDA for the second quarter of 2009 increased to NIS 1.1 million (US $0.3 million) compared with a loss of NIS 0.2 million for the same period last year. Other: During the second quarter of 2009, Internet Gold incurred operating expenses of approximately NIS 1.3 million (US $0.33 million). These expenses were primarily for activities related to the Company's listing on public securities exchanges, including expenses such as investor relations, Sarbanes Oxley compliance, insurance and legal expenses and for the continued investigation of potential joint venture and M&A opportunities. Buyback Programs - Share Repurchase Program: The Company repurchased 423,374 of its ordinary shares during the quarter ended June 30, 2009. The total number of Internet Gold shares repurchased through the Company's share repurchase programs as of June 30, 2009 reached 5,366,668 shares, bringing the number of total outstanding shares as of June 30, 2009 to 18,151,738. From June 30, 2009 to August 10, 2009, an additional 72,391 shares were repurchased, reducing the total number of outstanding shares to 18,079,347 as of August 10, 2009. - Bond Repurchase Program: The Company did not repurchase any of its bonds during the quarter or to date. As of June 30, 2009, NIS 78,724,338 par value of Series A bonds and NIS 417,285,630 par value of Series B bonds, remain outstanding. Notes: 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, income attributable to non-controlling interest, expenses recorded for stock compensation in accordance with 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 June 30, 2009 have been presented in thousands of U.S. dollars, translated at the representative rate of exchange as of June 30, 2009 (NIS 3.919 = 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. 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, but are not limited to, general business conditions in the industry, changes in the regulatory and legal compliance environments in the industries it is engaged, the failure to manage growth and other risks detailed from time to time in Internet Gold's filings with the Securities Exchange Commission, including Internet Gold's Annual Report on Form 20-F. 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. About Internet Gold Internet Gold is one of Israel's leading communications groups with a major presence across all Internet-related sectors. Its 74.79% owned subsidiary, 012 Smile.Communications Ltd., is one of Israel's major Internet and international telephony service providers, and one of the largest providers of enterprise/IT integration services. Its 100% owned subsidiary, Smile.Media Ltd., manages a portfolio of Internet portals and e-Commerce sites. Consolidated Balance Sheets (in thousands) Convenience translation into U.S. dollars $1 = NIS 3.919 June 30 December 31 June 30 2009 2008 2009 (Unaudited) (Audited) (Unaudited) NIS thousands $ thousands Current assets Cash and cash equivalents 136,481 86,090 34,826 Marketable securities 476,340 214,895 121,546 Trade receivables, net 219,349 217,796 55,971 Related parties receivable 2,215 1,729 565 Prepaid expenses and other 29,193 27,046 7,449 current assts Deferred tax assets 808 26,116 206 Total current assets 864,386 573,672 220,563 Investments Long-term trade receivables 6,400 6,350 1,633 Marketable securities - 279,823 - Assets held for employee 17,779 17,786 4,537 severance benefits Deferred tax assets 55 57 14 Property and equipment, net 175,098 171,104 44,679 Other assets, net 325,768 302,934 83,125 Other intangible assets, net 162,972 174,640 41,585 Goodwill 416,888 416,888 106,376 Total assets 1,969,346 1,943,254 502,512 Consolidated Balance Sheets (cont'd) Convenience translation into U.S. dollars $1 = NIS 3.919 June 30 December 31 June 30 2009 2008 2009 (Unaudited) (Audited) (Unaudited) NIS thousands $ thousands Current liabilities Short-term bank credit 30,402 42,738 7,758 Current maturities of long-term obligations 6,632 11,238 1,692 Accounts payable 136,071 148,580 34,721 Current maturities of convertible 15,521 17,516 3,960 debentures Current maturities of debentures 75,654 100,142 19,304 Deferred tax liabilities 1,428 - 364 Other payable and accrued expenses 142,431 125,388 36,344 Related parties payable 606 3,223 155 Total current liabilities 408,745 448,825 104,298 Long term liabilities Long-term obligations and other payables - 760 - Convertible debentures 71,493 84,857 18,243 Debentures 767,345 812,254 195,801 Deferred tax liabilities 58,748 46,856 14,991 Liability for employee severance benefits 35,294 34,626 9,005 Total long term liabilities 932,880 979,353 238,040 Total liabilities 1,341,625 1,428,178 342,338 Shareholders' equity 418,689 324,604 106,836 Non-controlling interest 209,032 190,472 53,338 Total equity 627,721 515,076 160,174 Total liabilities and shareholders' equity 1,969,346 1,943,254 502,512 Consolidated Statements of Operations Convenience translation into dollars $1 = NIS 3.919 Six-month Three months period Six months period period ended ended ended June 30 June 30 June 30 2009 2008 2009 2008 2009 (Unaudited)(Unaudited) (Unaudited)(Unaudited) (Unaudited) NIS thousands NIS thousands $ thousands Revenue 308,618 281,423 610,275 561,055 155,722 Cost and operating expenses Cost of revenue 214,738 190,240 420,897 378,562 107,399 Selling and marketing 37,868 40,473 78,130 82,550 19,936 General and administrative 15,579 19,567 31,229 36,844 7,969 Impairment and other expenses, net - 2,062 - 6,922 - Total operating expenses 268,185 252,342 530,256 504,878 135,304 Operating income 40,433 29,081 80,019 56,177 20,418 Financial expenses (income), net (4,268) 32,606 (31,701) 55,071 (8,089) Income (loss) before income taxes 44,701 (3,525) 111,720 1,106 28,507 Income tax expenses 14,906 3,090 35,710 5,522 9,112 Income (loss) after income tax expenses 29,795 (6,615) 76,010 (4,416) 19,395 Net income attributable to non- controlling interest 6,588 1,497 19,960 3,047 5,093 Net income (loss) 23,207 (8,112) 56,050 (7,463) 14,302 Basic earnings (loss) per share Basic earnings (loss) per share 1.26 (0.37) 3.01 (0.33) 0.77 Weighted average number of ordinary shares used in calculation of basic earnings per share 18,367 21,845 18,644 22,388 18,644 Diluted earnings (loss) per share Diluted earnings (loss) per share 1.26 (0.37) 2.93 (0.33) 0.75 Weighted average number of shares used in calculation of diluted earnings per share 18,367 21,845 20,218 22,388 20,218 Reconciliation Table of Non-GAAP Measures (NIS in thousands) Convenience translation into dollars $1 = NIS 3.919 Six-month Three months period Six months period period ended ended ended June 30 June 30 June 30 2009 2008 2009 2008 2009 (Unaudited)(Unaudited) (Unaudited)(Unaudited) (Unaudited) NIS thousands NIS thousands $ thousands GAAP operating income 40,433 29,081 80,019 56,177 20,418 Adjustments Amortization of acquired intangible assets 5,606 6,820 11,440 13,640 2,920 Impairment and other expenses, net - 2,062 - 6,922 - Stock compensation in accordance with SFAS 123(R) 1,239 950 2,478 950 632 Non-GAAP adjusted operating income 47,278 38,913 93,937 77,689 23,970 GAAP tax expenses, net 14,906 3,090 35,710 5,522 9,112 Adjustments Amortization of acquired intangible assets Included in tax expenses, net 1,487 1,841 2,974 3,683 759 Non-GAAP tax expenses, net 16,393 4,931 38,684 9,205 9,871 Net income (loss) as reported 23,207 (8,112) 56,050 (7,463) 14,302 Non-controlling interest in operations of consolidated subsidiaries 6,588 1,497 19,960 3,047 5,093 Income tax expenses 14,906 3,090 35,710 5,522 9,112 Impairment and other expenses, net - 2,062 - 6,922 - Stock compensation in accordance with SFAS 123(R) 1,239 950 2,478 950 632 Financial expenses (income), net (4,268) 32,606 (31,701) 55,071 (8,089) Depreciation and amortization 28,878 28,673 56,687 56,994 14,465 Adjusted EBITDA 70,550 60,766 139,184 121,043 35,515 For further information, please contact: Ms. Idit Azulay, Internet Gold / Tel: +972-72-200-3848 DATASOURCE: Internet Gold CONTACT: For further information, please contact: Ms. Idit Azulay, Internet Gold, / Tel: +972-72-200-3848

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