B Communications Reports Financial Results
For the Third Quarter of 2017
– The Bezeq Group Reports Net Profit of NIS 322 Million for the Third Quarter of 2017, In Line With Its Guidance –
– Net Profit of NIS 39 Million Attributable to Shareholders of B Communications for the Third Quarter of 2017 –
Ramat Gan, Israel – November 30, 2017 – B Communications Ltd. (“the Company”) (NASDAQ Global Select Market and TASE: BCOM), a holding company with a controlling interest in Israel’s largest telecommunications provider, Bezeq, The Israel Telecommunication Corporation Ltd. (TASE: BEZQ), today reported its financial results for the third quarter of 2017.
“We are very pleased with the results of the third quarter of 2017 in which Bezeq achieved net profit of NIS 322 million ($91 million), which is in line with Bezeq’s 2017 annual net profit guidance of NIS 1.4 billion ($397 million). During the first nine months of 2017 we continued our deleveraging process by decreasing our unconsolidated net debt by more than NIS 250 million ($71 million), to only NIS 1.9 billion as of September 30, 2017. We are very pleased with Bezeq’s stable results and continue to focus on a smooth execution of our debt repayment and value creation plans,” said Doron Turgeman, CEO of B Communications.
Financial Liabilities and Liquidity
As of September 30, 2017, B Communications’ unconsolidated liquidity balances (comprised of cash and cash equivalents, short term investments, funds deposited in a pledged account and dividend receivable) totaled NIS 548 million ($155 million) and its financial liabilities totaled NIS 2.47 billion ($698 million), including NIS 2 billion ($568 million) of Series C Debentures and NIS 453 million ($128 million) of Series B Debentures (including accrued interest and unamortized premiums, discounts and debt issuance costs for both series).
| (In millions) | September 30, | September 30, | September 30, | December 31, |
| 2017 | 2017 | 2016 | 2016 | |
| NIS | US$ | NIS | NIS | |
| Financial liabilities | ||||
| Series B debentures | 453 | 128 | 683 | 693 |
| Series C debentures | 2,005 | 568 | 1,864 | 1,881 |
| Tax liability | 7 | 2 | 52 | 34 |
| Total financial liabilities | 2,465 | 698 | 2,599 | 2,608 |
| Liquidity | ||||
| Cash and short-term investments | 325 | 92 | 226 | 388 |
| Dividend receivable | 186 | 53 | 175 | – |
| Pledged account (*) | 37 | 10 | 47 | 47 |
| Total liquidity | 548 | 155 | 448 | 435 |
| Net debt | 1,917 | 543 | 2,151 | 2,173 |
* Account pledged as collateral to the security agent for the benefit of the holders of the Series C Debentures. Pursuant to the indenture for the Series C Debentures, the account is required to include sufficient funds to meet the next interest payment payable to the holders of those debentures.
B Communications Unconsolidated Sources and Uses for the Nine Months Ended September 30, 2017
| (In millions) | NIS | US$ |
| Net debt as of December 31, 2016 | 2,173 | 615 |
| Dividend received from Bezeq | (152) | (43) |
| Dividend receivable from Bezeq | (186) | (53) |
| Financing expenses, net | 76 | 22 |
| Operating expenses | 6 | 2 |
| Net debt as of September 30, 2017 | 1,917 | 543 |
Dividends from Bezeq: On May 29, 2017, we received a dividend of NIS 152 million ($43 million). On August 23, 2017, the Board of Directors of Bezeq resolved to recommend to the general meeting of its shareholders the distribution of a cash dividend of NIS 708 million ($201 million), representing Bezeq’s net profit for the first half of 2017. The dividend, which was approved by the general meeting of shareholders of Bezeq on September 18, 2017, was paid on October 16, 2017. B Communications’ share of the dividend distribution was NIS 186 million ($53 million).
B Communications’ Third Quarter Consolidated Financial Results
B Communications’ consolidated revenues for the third quarter of 2017 totaled NIS 2.42 billion ($683 million), a 3.8% decrease compared to the NIS 2.5 billion reported in the third quarter of 2016. For both the current and the prior-year periods, B Communications’ consolidated revenues consisted entirely of Bezeq’s revenues.
B Communications’ consolidated operating profit for the third quarter of 2017 totaled NIS 420 million ($119 million), a 13.9% decrease compared to the NIS 488 million reported in the third quarter of 2016.
B Communications’ consolidated net profit for the third quarter of 2017 totaled NIS 208 million ($59 million) compared with a net loss of NIS 27 million reported in the third quarter of 2016.
B Communications’ net profit attributable to shareholders in the third quarter of 2017 was NIS 39 million ($11 million) compared with a net loss attributable to shareholders of NIS 257 million reported in the third quarter of 2016.
B Communications’ Third Quarter Unconsolidated Financial Results
| (In millions) | Three months ended September 30, | Year ended December 31, | ||
| 2017 | 2017 | 2016 | 2016 | |
| NIS | US$ | NIS | NIS | |
| Interest in Bezeq’s net profit | 85 | 23 | 104 | 332 |
| Financing expenses, net | (19) | (5) | (338) | (485) |
| Operating expenses | (2) | – | (2) | (12) |
| Income tax expenses | – | – | – | (4) |
| PPA amortization, net | (25) | (7) | (21) | (67) |
| Net profit (loss) | 39 | 11 | (257) | (236) |
As of September 30, 2017, B Communications held approximately 26.34% of Bezeq’s outstanding shares. B Communications’ interest in Bezeq’s net profit for the third quarter of 2017 totaled NIS 85 million ($23 million), compared with NIS 104 million reported in the third quarter of 2016.
During the third quarter of 2017, B Communications recorded net amortization expenses of NIS 25 million ($7 million), related to its Bezeq purchase price allocation (“Bezeq PPA”). From April 14, 2010, the date of the acquisition of its interest in Bezeq, until September 30, 2017, B Communications has amortized approximately 79% of the total Bezeq PPA. The Bezeq PPA amortization expense is a non-cash expense that is subject to adjustment.
B Communications’ unconsolidated net financial expenses for the third quarter of 2017 totaled NIS 19 million ($5 million) compared with net financial expenses of NIS 338 million in the third quarter of 2016. Net financial expenses for the third quarter of 2016 consisted primarily of NIS 270 million of one-time refinancing expenses relating to the early redemption of the Company’s 7⅜% Senior Secured Notes (the “Notes”). Net financial expenses for the third quarter of 2017 included NIS 26 million ($7 million) related to the Company’s Series B and C debentures. These expenses were partially offset by financial income of NIS 7 million ($2 million) generated by short term investments.
B Communications’ unconsolidated net profit for the third quarter of 2017 was NIS 39 million ($11 million) compared with a net loss attributable to shareholders of NIS 257 million reported in the third quarter of 2016, which loss was due to the early redemption of the Notes.
The Bezeq Group Results (Consolidated)
To provide further insight into its results, the Company is providing the following summary of the consolidated financial report of the Bezeq Group for the quarter ended September 30, 2017. For a full discussion of Bezeq’s results for the quarter ended September 30, 2017, please refer to its website: http://ir.bezeq.co.il.
Revenues of the Bezeq Group in the third quarter of 2017 were NIS 2.42 billion ($683 million) compared to NIS 2.51 billion in the corresponding quarter of 2016, a decrease of 3.8%. The decrease was due to lower revenues in all group segments.
Salary expenses of the Bezeq Group in the third quarter of 2017 were NIS 502 million ($142 million) compared to NIS 501 million in the corresponding quarter of 2016.
Operating expenses of the Bezeq Group in the third quarter of 2017 were NIS 956 million ($271 million) compared to NIS 994 million in the corresponding quarter of 2016, a decrease of 3.8%. The decrease in operating expenses was due to a reduction in the operating expenses of the various Group subsidiaries, which was influenced by the early adoption of accounting standard IFRS 15.
Other operating income, net of the Bezeq Group in the third quarter of 2017 amounted to NIS 23 million ($7 million) compared to NIS 26 million in the corresponding quarter of 2016. The decrease in other operating income was due to a NIS 11 million ($3 million) fine imposed by the Ministry of Communications as well as an increase in provisions for legal claims, partially offset by an increase in capital gains from the sale of real estate by Bezeq Fixed-Line.
Depreciation and amortization expenses of the Bezeq Group in the third quarter of 2017 were NIS 436 million ($124 million) compared to NIS 442 million in the corresponding quarter of 2016, a decrease of 1.4%. The decrease in depreciation expenses was due to a reduction in the amortization expenses related to the purchase price allocation recorded in connection with the increase in its ownership interest in Yes, partially offset by an increase in depreciation expenses in the cellular segment due to the early adoption of accounting standard IFRS 15.
Operating profit of the Bezeq Group in the third quarter of 2017 was NIS 544 million ($154 million) compared to NIS 599 million in the corresponding quarter of 2016, a decrease of 9.2%.
Financing expenses, net of the Bezeq Group in the third quarter of 2017 amounted to NIS 94 million ($27 million) compared to NIS 104 million in the corresponding quarter of 2016, a decrease of 9.6%. The decrease in financing expenses was primarily due lower expenses at Yes partially offset by an update in the estimated fair value of advanced payments made by the Bezeq Group to Eurocom DBS of NIS 13 million ($4 million).
Tax expenses of the Bezeq Group in the third quarter of 2017 were NIS 128 million ($36 million) compared to NIS 99 million in the corresponding quarter of 2016, an increase of 29.3%. The increase in tax expenses was due a decrease in tax expenses in the third quarter of 2016 as a result of tax adjustments in respect of prior years at Bezeq Fixed-Line.
Net profit of the Bezeq Group in the third quarter of 2017 was NIS 322 million ($91 million) compared to NIS 394 million in the corresponding quarter of 2016, a decrease of 18.3%. The decrease in net profit was due to the aforementioned reduction in revenues and increase in tax expenses.
EBITDA of the Bezeq Group in the third quarter of 2017 was NIS 980 million ($278 million) (EBITDA margin of 40.6%) compared to NIS 1.04 billion (EBITDA margin of 41.5%) in the corresponding quarter of 2016, a decrease of 5.9%.
Cash flow from operating activities of the Bezeq Group in the third quarter of 2017 was NIS 982 million ($278 million) compared to NIS 902 million in the corresponding quarter of 2016, an increase of 8.9%. The increase in cash flow from operating activities was due to changes in working capital.
Payments for investments (Capex) of the Bezeq Group in the third quarter of 2017 was NIS 353 million ($100 million) compared to NIS 349 million in the corresponding quarter of 2016.
Free cash flow of the Bezeq Group in the third quarter of 2017 was NIS 677 million ($192 million) compared to NIS 577 million in the corresponding quarter of 2016, an increase of 17.3%. The increase in free cash flow was due to the aforementioned increase in cash flow from operating activities as well as an increase in proceeds from the sale of real estate due to timing differences.
Total debt of the Bezeq Group as of September 30, 2017 was NIS 11.5 billion ($3.3 billion) compared to NIS 11.2 billion as of September 30, 2016.
Net debt of the Bezeq Group as of September 30, 2017 was NIS 9.0 billion ($2.54 billion) compared to NIS 9.4 billion as of September 30, 2016.
Net debt to EBITDA (trailing twelve months) ratio of the Bezeq Group as of September 30, 2017, was 2.29, compared to 2.31 as of September 30, 2016.
ISA Investigation: The Company has been reporting the events concerning the investigation by the Israel Securities Authority (“ISA”) relating to alleged improprieties surrounding the YES-Bezeq transaction and the transaction between YES and Space Communication Ltd. As reported, the investigation appears to focus on Bezeq’s 2015 acquisition of the remaining ownership interest in its satellite TV unit, YES, from its then parent company, Eurocom DBS. Following initial reports concerning the investigation, civil claims with motions to certify the claims as class action lawsuits were filed in Israel against the Company, Bezeq and others. The Company is currently evaluating the claims and its course of action.
On November 6, 2017, the Securities Authority issued a press release indicating the conclusion of the investigation and the transfer of the investigation file to the Tel Aviv District Attorney’s Office (Taxation and Economics). The District Attorney’s Office is authorized to decide on further action at their discretion.
Notes:
Convenience translation to U.S Dollars
Unless noted specifically otherwise, the dollar denominated figures were converted to US$ using a convenience translation based on the New Israeli Shekel (NIS)/US$ exchange rate of NIS 3.529 = US$ 1 as published by the Bank of Israel for September 30, 2017.
Use of non-IFRS financial measures
We and the Bezeq Group’s management regularly use supplemental non-IFRS financial measures internally to understand, manage and evaluate its business and make operating decisions. The following non-IFRS measures are provided in the press release and accompanying supplemental information because management believes these measurements are useful for investors and financial institutions to analyze and compare companies on the basis of operating performance:
- EBITDA – defined as net profit plus income tax expenses, share of loss in equity accounted investee, net financing expenses and depreciation and amortization;
- EBITDA trailing twelve months – defined as net profit plus income tax expenses, share of loss in equity accounted investee, net financing expenses and depreciation and amortization during last twelve months;
- Net debt – defined as long and short-term bank loans and debentures minus cash and cash equivalents and short-term investments;
- Net debt to EBITDA ratio – defined as net debt divided by the trailing twelve months EBITDA;
- Free Cash Flow (FCF) – defined as cash from operating activities less cash for the purchase/sale of property, plant and equipment, and intangible assets, net.
These non-IFRS financial measures may differ materially from the non-IFRS financial measures used by other companies.
We present the Bezeq Group’s EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by variations in capital structure, tax positions (such as the impact of changes in effective tax rates or net operating losses) and the age of, and depreciation expenses associated with, fixed assets (affecting relative depreciation expense).
EBITDA should not be considered in isolation or as a substitute for net profit or other statement of operations or cash flow data prepared in accordance with IFRS as a measure of profitability or liquidity. EBITDA does not take into account our debt service requirements and other commitments, including capital expenditures, and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. In addition, EBITDA, as presented in this press release, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.
Management of Bezeq believes that free cash flow is an important measure of its liquidity as well as its ability to service long-term debt, fund future growth and to provide a return to shareholders. We also believe this free cash flow definition does not have any material limitations. Free cash flow is a financial index which is not based on IFRS. Free cash flow is defined as cash from operating activities less cash for the purchase/sale of property, plant and equipment, and intangible assets, net.
Bezeq also uses the net debt and net debt to EBITDA trailing twelve months ratio to analyze its financial capacity for further leverage and in analyzing the company’s business and financial condition. Net debt reflects long and short-term liabilities minus cash and cash equivalents and investments.
Reconciliations between the Bezeq Group’s results on an IFRS and non-IFRS basis with respect to these non-IFRS measurements are provided in tables immediately following the Company’s consolidated results. The non-IFRS financial measures are not meant to be considered in isolation or as a substitute for comparable IFRS measures, and should be read only in conjunction with its consolidated financial statements prepared in accordance with IFRS.
About B Communications Ltd.
B Communications is a holding company with a controlling interest in Israel’s largest telecommunications provider, Bezeq, The Israel Telecommunication Corp. (TASE: BEZQ). B Communications shares are traded on NASDAQ and the TASE under the symbol “BCOM.” For more information please visit the following Internet sites:
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, the failure to manage growth and other risks detailed from time to time in B Communications’ filings with the Securities Exchange Commission. These documents contain and identify other important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. Stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update publicly or revise any forward-looking statement.
For further information, please contact:
Idit Cohen – IR Manager
idit@igld.com / Tel: +972-3-924-0000
Investor relations contacts:
Hadas Friedman – Investor Relations
Hadas@km-ir.co.il / Tel: +972-3-516-7620
B Communications Ltd.
Condensed Consolidated Statements of Financial Position as at
(In millions)
| September 30, | September 30, | September 30, | December 31, | |
| 2017 | 2017 | 2016 | 2016 | |
| NIS | US$ | NIS | NIS | |
| Current Assets | ||||
| Cash and cash equivalents | 2,542 | 720 | 948 | 762 |
| Investments | 385 | 109 | 1,170 | 907 |
| Trade receivables | 1,948 | 552 | 1,998 | 2,000 |
| Other receivables | 294 | 83 | 228 | 216 |
| Related party | 43 | 13 | – | – |
| Inventory | 101 | 29 | 96 | 106 |
| Total current assets | 5,313 | 1,506 | 4,440 | 3,991 |
| Non-Current Assets | ||||
| Trade and other receivables | 520 | 147 | 641 | 644 |
| Property, plant and equipment | 6,974 | 1,977 | 7,042 | 7,072 |
| Intangible assets | 6,102 | 1,729 | 6,724 | 6,534 |
| Deferred expenses and investments | 557 | 158 | 483 | 465 |
| Broadcasting rights | 457 | 129 | 450 | 432 |
| Deferred tax assets | 1,014 | 287 | 1,103 | 1,007 |
| Total non-current assets | 15,624 | 4,427 | 16,443 | 16,154 |
| Total assets | 20,937 | 5,933 | 20,883 | 20,145 |
B Communications Ltd.
Condensed Consolidated Statements of Financial Position as at
(In millions)
| September 30, | September 30, | September 30, | December 31, |
| 2017 | 2017 | 2016 | 2016 |
| NIS | US$ | NIS | NIS |
| Current Liabilities | ||||
| Bank loans and credit and debentures | 780 | 221 | 2,360 | 2,051 |
| Trade and other payables | 1,831 | 519 | 1,602 | 1,640 |
| Related party | – | – | 6 | 32 |
| Dividend payable | 522 | 148 | 490 | – |
| Current tax liabilities | 125 | 35 | 223 | 138 |
| Provisions | 94 | 27 | 87 | 80 |
| Employee benefits | 251 | 71 | 280 | 315 |
| Total current liabilities | 3,603 | 1,021 | 5,048 | 4,256 |
| Non-Current Liabilities | ||||
| Bank loans and debentures | 13,186 | 3,736 | 11,430 | 11,446 |
| Employee benefits | 260 | 74 | 237 | 258 |
| Other liabilities | 292 | 83 | 257 | 244 |
| Provisions | 48 | 14 | 47 | 47 |
| Deferred tax liabilities | 516 | 146 | 645 | 593 |
| Total non-current liabilities | 14,302 | 4,053 | 12,616 | 12,588 |
| Total liabilities | 17,905 | 5,074 | 17,664 | 16,844 |
| Equity | ||||
| Attributable to shareholders of the Company | 1,288 | 365 | 1,169 | 1,170 |
| Non-controlling interests | 1,744 | 494 | 2,050 | 2,131 |
| Total equity | 3,032 | 859 | 3,219 | 3,301 |
| Total liabilities and equity | 20,937 | 5,933 | 20,883 | 20,145 |
B Communications Ltd.
Condensed Consolidated Statements of Income for the
(In millions except per share data)
| Year ended | ||||||
| Nine months period ended September 30, | Three months period ended September 30, | December 31, | ||||
| 2017 | 2017 | 2016 | 2017 | 2017 | 2016 | 2016 |
| NIS | US$ | NIS | NIS | US$ | NIS | NIS |
| Revenues | 7,331 | 2,077 | 7,580 | 2,415 | 683 | 2,510 | 10,084 |
| Costs and expenses | |||||||
| Depreciation and amortization | 1,590 | 451 | 1,622 | 537 | 152 | 539 | 2,161 |
| Salaries | 1,500 | 425 | 1,509 | 502 | 142 | 501 | 2,015 |
| General and operating expenses | 2,894 | 820 | 2,991 | 958 | 271 | 996 | 4,021 |
| Other operating expenses | |||||||
| (income), net | (1) | – | (21) | (2) | (1) | (14) | 21 |
| 5,983 | 1,696 | 6,101 | 1,995 | 564 | 2,022 | 8,218 | |
| Operating profit | 1,348 | 381 | 1,479 | 420 | 119 | 488 | 1,866 |
| Financing expenses, net | 373 | 106 | 777 | 113 | 32 | 442 | 931 |
| Profit after financing | |||||||
| expenses, net | 975 | 275 | 702 | 307 | 87 | 46 | 935 |
| Share of loss in | |||||||
| equity-accounted investee | 4 | 1 | 4 | – | – | 2 | 5 |
| Profit before income tax | 971 | 274 | 698 | 307 | 87 | 44 | 930 |
| Income tax expenses | 273 | 76 | 301 | 99 | 28 | 71 | 442 |
| Net profit (loss)for the period | 698 | 198 | 397 | 208 | 59 | (27) | 488 |
| Profit (loss) attributable to: | |||||||
| Shareholders of the Company | 123 | 35 | (240) | 39 | 11 | (257) | (236) |
| Non-controlling interests | 575 | 163 | 637 | 169 | 48 | 230 | 724 |
| Net profit (loss) for the period | 698 | 198 | 397 | 208 | 59 | (27) | 488 |
| Earnings (loss) per share | |||||||
| Basic | 4.11 | 1.16 | (8.01) | 1.28 | 0.36 | (8.60) | (7.92) |
| Diluted | 4.11 | 1.16 | (8.01) | 1.28 | 0.36 | (8.60) | (7.92) |
Reconciliation for NON-IFRS Measures
EBITDA
The following is a reconciliation of the Bezeq Group’s net profit to EBITDA:
| (In millions) | Three months period ended September 30, | Trailing twelve months endedSeptember 30, | ||||
| 2017 | 2017 | 2016 | 2017 | 2017 | 2016 | |
| NIS | US$ | NIS | NIS | US$ | NIS | |
| Net profit | 322 | 91 | 394 | 1,215 | 344 | 1,428 |
| Income tax expenses | 128 | 36 | 99 | 562 | 159 | 534 |
| Share of loss in equity- accounted investee | – | – | 2 | 5 | 1 | 7 |
| Financing expenses, net | 94 | 27 | 104 | 433 | 123 | 308 |
| Depreciation and amortization | 436 | 124 | 442 | 1,696 | 481 | 1,790 |
| EBITDA | 980 | 278 | 1,041 | 3,911 | 1,108 | 4,067 |
Net Debt
The following table shows the calculation of the Bezeq Group’s net debt:
| (In millions) | As at September 30, | ||
| 2017 | 2017 | 2016 | |
| NIS | US$ | NIS | |
| Short term bank loans and credit and debentures | 555 | 157 | 2,135 |
| Non-current bank loans and debentures | 10,978 | 3,110 | 9,111 |
| Cash and cash equivalents | (2,471) | (700) | (938) |
| Investments | (94) | (27) | (908) |
| Net debt | 8,968 | 2,540 | 9,400 |
Net Debt to Trailing Twelve Months EBITDA Ratio
The following table shows the calculation of the Bezeq Group’s net debt to trailing twelve months EBITDA ratio:
| (In millions) | As at September 30, | ||
| 2017 | 2017 | 2016 | |
| NIS | US$ | NIS | |
| Net debt | 8,968 | 2,540 | 9,400 |
| Trailing twelve months EBITDA | 3,911 | 1,108 | 4,067 |
| Net debt to EBITDA ratio | 2.29 | 2.29 | 2.31 |
Reconciliation for NON-IFRS Measures
Free Cash Flow
The following table shows the calculation of the Bezeq Group’s free cash flow:
| (In millions) | Three months period ended September 30, | ||
| 2017 | 2017 | 2016 | |
| NIS | US$ | NIS | |
| Cash flow from operating activities | 982 | 278 | 902 |
| Purchase of property, plant and equipment | (255) | (72) | (290) |
| Investment in intangible assets and deferred expenses | (98) | (28) | (59) |
| Proceeds from the sale of property, plant and equipment | 48 | 14 | 24 |
| Free cash flow | 677 | 192 | 577 |
Designated Disclosure with Respect to the Company’s Projected Cash Flows
In connection with the issuance of our Series C Debentures in September 2016, we undertook to comply with the “hybrid model disclosure requirements” as determined by the Israeli Securities Authority and as described in the prospectus governing our Series C Debentures.
This model provides that in the event certain financial “warning signs” exist, and for as long as they exist, we will be subject to certain disclosure obligations towards the holders of our Series C Debentures.
In examining the existence of warning signs as of September 30, 2017, our board of directors noted that our consolidated financial statements (unaudited) as well as our separate internal (unpublished) unaudited financial information as of and for the quarter ended September 30, 2017 reflect that we had a continuing negative cash flow from operating activities of NIS 2 million for the third quarter of 2017.
The Israeli regulations provide that the existence of a continuing negative cash flow from operating activities could be deemed to be a “warning sign” unless our board of directors determines that the possible “warning sign” does not reflect a liquidity problem.
Such continuing negative cash flow from operating activities results from the general operating expenses of the Company of NIS 2 million for the third quarter of 2017 and due to the fact that the Company, as a holding company, does not have any cash inflows from operating activities. Our main source of cash inflows is generated from dividends (classified as cash flow from investing activities) or debt issuances (classified as cash flow from financing activities).
Such continuing negative cash flow from operating activities does not effect our liquidity in any manner. Our board of directors reviewed our financial position, outstanding debt obligations and our existing and anticipated cash resources and uses and determined that the existence of the continuing negative cash flow from operating activities, as mentioned above, does not reflect a liquidity problem.
Disclosure with Respect to the Company’s Requirements Under Series C Debentures
The Company declares with respect to the PR reporting period as follows:
- The Company did not record in favor of a third party any lien of any rank whatsoever over its direct or indirect holdings of 691,361,036 shares of Bezeq (the “Bezeq Shares”) including over any of the rights accompanying such shares.
- The Company did not make any disposition of the Bezeq Shares.
- The Company did not assume any financial debt (as defined in the Trust Deed of the Series C Debentures) during the reporting period (other than in the framework of the issuance of the Debentures, and its wholly owned subsidiaries, including B Communications (SP1) and B Communications (SP2) did not issue any financial debt whatsoever during the reporting period.
- As of the reporting date, the Company holds approximately 26.34% of Bezeq’s outstanding shares, directly and through its subsidiary.
- The equity attributable to the Company’s shareholders (not including non-controlling interests) according to this report amounts to NIS 1,288 million, and represents 34.3% of the Company’s total balance sheet on an unconsolidated basis.
B Communications’ Unconsolidated Balance Sheet
| (In millions) | September 30, | September 30, | September 30, | December 31, |
| 2017 | 2017 | 2016 | 2016 | |
| NIS | US$ | NIS | NIS | |
| Current assets | ||||
| Cash and cash equivalents | 71 | 20 | 55 | 114 |
| Short-term investments | 291 | 82 | 219 | 321 |
| Dividend receivable | 186 | 53 | 175 | – |
| Other receivables | – | – | 5 | 1 |
| Total current assets | 548 | 155 | 454 | 436 |
| Non-current assets | ||||
| Investment in an investee (*) | 3,205 | 908 | 3,314 | 3,342 |
| Total assets | 3,753 | 1,063 | 3,768 | 3,778 |
| Current liabilities | ||||
| Current maturities of debentures | 226 | 64 | 226 | 226 |
| Other payables | 31 | 9 | 54 | 64 |
| Total current liabilities | 257 | 73 | 280 | 290 |
| Non-current liabilities | ||||
| Debentures | 2,208 | 625 | 2,319 | 2,318 |
| Total liabilities | 2,465 | 698 | 2,599 | 2,608 |
| Total equity | 1,288 | 365 | 1,169 | 1,170 |
| Total liabilities and equity | 3,753 | 1,063 | 3,768 | 3,778 |
(*) Investment in Bezeq.