RRsat Reports Third Quarter 2012 Results and Declares a Special Dividend

RRsat Reports Third Quarter 2012 Results and Declares a Special Dividend

Sequential revenue improvement with gross, operating and EBITDA margins at their highest level in 9 quarters

AIRPORT CITY BUSINESS PARK, Israel, November 12, 2012 /PRNewswire/ --



2012 Third Quarter Highlights




- Revenues totaled $28.5 million, representing sequential growth;
- Gross margin at 24.5%, operating margin of 9.0% and adjusted EBITDA margin of
17.2%, at the highest level in the last 9 quarters;
- Adjusted EBITDA of $4.9 million, representing sequential growth;
- Operating cash flow, net of capital expenditures, of $4.1 million; ended the
quarter with $36.9 million in cash and equivalents;
- Backlog as of September 30, 2012 at $184 million;
- Fourth quarter revenue guidance of $28.5- $29.5 million;
- Board of Directors declared a cash dividend of $10 million or $0.58 per share.


RRsat Global Communications Network Ltd. (NASDAQ: RRST), a leading provider of
comprehensive digital content management and global distribution services to the
television and radio broadcasting industries, today announced its financial results for
the quarter ended September 30, 2012.



Third Quarter 2012 Results



Revenues in the third quarter of 2012 totaled $28.5 million, compared with $28.6
million in the third quarter of 2011 and a sequential increase compared with $28.1 million
in the previous quarter. The strengthening of the US Dollar versus the Euro over the past
year had a negative impact of approximately $1.4 million on third quarter revenues,
compared with the revenues of the third quarter of 2011. The US Dollar-Euro volatility
during the third quarter of 2012 had a negative impact of approximately $0.4 million on
the Company's revenues compared with that of the prior quarter.



Gross profit in the third quarter of 2012 totaled $7.0 million, compared with $6.4
million in the third quarter of 2011 and $6.7 million in the previous quarter. Gross
margin in the third quarter of 2012 was 24.5%, compared with 22.3% in the third quarter of
2011 and 23.8% in the previous quarter.



Operating income for the third quarter of 2012 totaled $2.6 million, compared with
$1.8 million in the third quarter of 2011 and $2.5 million in the previous quarter.
Operating margin in the third quarter of 2012 was 9.0%, compared with 6.4% in the third
quarter of 2011 and 8.8% in the previous quarter.



Net income on a GAAP basis for the third quarter of 2012 was $2.4 million, compared
with a net loss on a GAAP basis of $180 thousand in the third quarter of 2011 and net
income of $1.1 million in the previous quarter. Net income per share on a fully diluted
basis under GAAP for the third quarter of 2012 was $0.14, compared with a net loss per
share of $0.01 in the third quarter of 2011 and net income per share of $0.07 in the
previous quarter.



Adjusted net income totaled $2.1 million for the third quarter of 2012, compared with
$0.8 million in the third quarter of 2011 and $1.5 million in the previous quarter.
Adjusted net income per share on a fully diluted basis totaled $0.12 in the third quarter
of 2012, compared with $0.05 in the third quarter of 2011 and $0.08 in the previous
quarter.



Adjusted EBITDA for the third quarter of 2012 totaled $4.9 million, compared with $4.0
million in the third quarter of 2011 and $4.8 million in the previous quarter.



Cash, cash equivalents and marketable securities as of September 30, 2012 totaled
$36.9 million compared with $34.2 million as of June 30, 2012. The change in cash position
during the quarter was mainly attributable to a positive operating cash flow of $5.4
million, partially offset by capital expenditure of $1.3 million and a dividend payment to
shareholders of $1.7 million.



Backlog of signed agreements, as of September 30, 2012, totaled $184 million, compared
with a backlog of $193 million at the end of the previous quarter, of which $24.6 million
is expected to be recognized as revenues in the fourth quarter of 2012. The reduction in
the backlog amount is mainly attributed to the decrease in the average length of service
contracts received during the quarter.



Guidance



Guidance for the fourth quarter of 2012 expects continued sequential revenue growth,
with revenues in the range of $28.5 - $29.5 million. Management expects gross and EBITDA
margins in the fourth quarter to be at similar levels to the margins reported in the third
quarter of 2012.



Dividend Distribution



On November 11, 2012, the Board of Directors declared a cash dividend in the amount of
$0.58 per ordinary share, and in the aggregate amount of approximately $10 million. The
dividend will be payable on December 13, 2012 to all of the Company's shareholders of
record at the end of the trading day on the NASDAQ on November 22, 2012.



In accordance with Israeli tax law, the Company will withhold 25% of the dividend
amount payable to each shareholder at source, subject to applicable exemptions. The
Company's dividend policy is described in detail in its most recent Annual Report on Form
20-F for the year ended December 31, 2011.



Management Comment



Avi Cohen, CEO of RRsat commented, "The third quarter results demonstrate that we are
on track with continued improvement across all our financial and operational parameters.
We met our top line targets despite continued negative currency effects, growing our
revenues sequentially. Most importantly, our gross, operating and EBITDA margins reached
their highest levels in over two years. Given our strong backlog, we maintain relatively
good visibility into the next few quarters. Looking ahead to the fourth quarter, we
believe we will continue our sequential revenue growth."



Continued Mr. Cohen, "We continue to see solid interest and new customer wins for our
digital media broadcasting services. In addition, over the past two years, we have
strengthened our ability to provide customers with an end-to-end content delivery service
for sports and special events on an occasional use (OU) basis. Based on our enhanced
abilities in this area, we were recently selected by the European Broadcasting Union
(EBU), as their main partner for Asia-Europe digital media distribution, covering major
European events, including live sports and news events. We see the occasional use segment
of our market as a strong growth engine for RRsat over the coming years."



Conference Call Information



Conference call scheduled later today, November 12, 2012 at 9:00 am ET (4:00 pm Israel
time). On the call, Avi Cohen, CEO and Itzhak Zion, CFO, will review and discuss the
results and will be available to answer investor questions.



To participate, please call one of the following teleconferencing numbers. 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: 1-888-668-9141
UK Dial-in Number: 0-800-917-5108
Israel Dial-in Number: 03-918-0609
International Dial-in Number: +972-3-918-0609
at:
9:00 am Eastern Time; 6:00 am Pacific Time; 2:00 pm UK Time; 4:00 pm Israel
Time


Replay



A replay of the call will be available from the day after the call. A link to the
replay will be accessible from RRsat's website at: http://www.rrsat.com. In addition,
a telephone replay will be available for two days following the call. To access the
telephone replay dial one of the following numbers:



1-888-326-9310 (US) and +972-3-925-5901 (International).



Use of Non-GAAP Financial Measures



In addition to the GAAP results included in this press release, RRsat has also
included non-GAAP measurements of results. RRsat uses three financial measures, adjusted
net income, adjusted net income per share and adjusted EBITDA, which are non-GAAP
financial measures. RRsat believes that these non-GAAP financial measures are principal
indicators of the operating and financial performance of its business. We have provided
these non-GAAP measurements to help investors better understand our core operating
performance and enhance comparisons of core operating performance from period to period.



Adjusted net income is calculated based on the net income in our financial statements
excluding non-cash equity-based compensation charges recorded in accordance with FASB ASC
Topic 718, non-cash expense resulting from amortization of acquired intangible assets,
non-cash income (loss) reflecting changes in the fair value of embedded currency
conversion derivatives resulting from the application of FASB ASC Topic 815 and the
resulting income tax (increase) decrease of the above items.



Adjusted EBITDA is calculated by adding to operating income, non-cash equity-based
compensation charge, depreciation and amortization.



The company has excluded intangible assets amortization expense from its non-GAAP net
income and EBITDA measurements, primarily because it represents a significant non-cash
expense and because the company evaluates its performance excluding intangible assets
amortization expense. Amortization of intangible assets is consistent in amount and
frequency but is significantly affected by the timing and size of the company's
acquisitions. Investors should note that the use of intangible assets contributed to the
Company's revenues earned during the periods presented and will contribute to the
Company's future period revenues as well. Intangible assets amortization expense will
recur in future periods.



Management uses these non-GAAP financial measures to assess its operational
performance, for financial and operational decision-making, and as a means to evaluate
period-to-period comparisons on a consistent basis. Management believes that these
non-GAAP financial measures provide meaningful supplemental information regarding the
Company's performance by excluding certain non-cash expenses that are not directly
attributable to its core operating results.



The non-GAAP measurements are intended only as a supplement to the comparable GAAP
measurements and the company compensates for the limitations inherent in the use of
non-GAAP measurements by using GAAP measures in conjunction with the non-GAAP
measurements. As a result, investors should consider these non-GAAP measurements in
addition to, and not in substitution for, or as superior to, measurements of financial
performance prepared in accordance with GAAP.



The Company expects to continue reporting non-GAAP financial measures, adjusting for
the items described above, and the Company expects to continue to incur expenses similar
to the non-cash, non-GAAP adjustments described above. Accordingly, the exclusion of these
and other similar items in the presentation of non-GAAP financial measures should not be
construed as an inference that these costs are unusual, infrequent or non-recurring.
Moreover, because not all companies use identical measures and calculations, the
presentation of adjusted net income, adjusted net income per share and adjusted EBITDA may
not be comparable to other similarly titled measures of other companies. These limitations
are compensated for by using adjusted net income and adjusted EBITDA in conjunction with
traditional GAAP financial measures.



Reconciliations of the non-GAAP measures (adjusted net income and adjusted EBITDA) to
the most comparable GAAP measures (net income and operating income respectively), are
provided in the schedules attached to this release.



Safe Harbor Statement



This press release contains forward looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, including statements regarding (i) guidance for revenue and
margins for the fourth quarter of 2012 or any future periods; (ii) our expectations to
decrease capital expenditures in 2012, and the corresponding effect on free cash flow;
(iii) our planned expectations of our direct sales to North America, Africa and Asia; (iv)
our goal of offering superior services to a larger group of customers, including major
television networks; (v) our expectation to expand our client base and sell additional
services to our existing client base; (vi) our ability to report future successes; and
(vii) our intention to distribute dividends in the future and the size of any dividends
declared. These forward-looking statements involve known and unknown risks and
uncertainties and are based on current expectations, assumptions, estimates and
projections about the companies and the industry as of the date of this press release. The
company undertakes no obligation to update forward-looking statements to reflect
subsequent occurring events or circumstances, or to changes in its expectations, except as
may be required by law. Forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially from those contemplated by the
forward-looking statements, including the risks indicated in our filings with the
Securities and Exchange Commission (SEC). For more details, please refer to our SEC
filings and the amendments thereto, including our Annual Report on Form 20-F for the year
ended December 31, 2011 and our Current Reports on Form 6-K.



About RRsat Global Communications Network Ltd.



RRsat Global Communications Network Ltd. (NASDAQ: RRST) provides global, end-to-end,
content management and distribution services to the rapidly expanding television and radio
broadcasting industries, covering more than 150 countries. Through its RRsat Global
Network, composed of satellite and terrestrial fiber optic capacity and the public
Internet, RRsat provides high-quality and flexible global distribution services 24/7 to
more than 630 channels reaching multiplatform operators, Internet TV and direct-to-home
viewers worldwide and also offers occasional use services for sports, news and events with
a fleet of flyaways and over 10 transportable satellite news gathering services (SNG)
units. More than 130 television and radio channels use RRsat's advanced production and
playout centers comprising comprehensive media asset management services. Visit the
company's website http://www.rrsat.com



FINANCIAL TABLES FOLLOW



RRsat Global Communications Network Ltd. and its Subsidiaries



Consolidated Statements of Operations




In thousands, except share data
Nine months ended Three months ended
---------------------- ----------------------
September September September September
30 30 30 30
2012 2011 2012 2011
--------- ---------- --------- ----------
Revenues $ 84,035 $ 84,094 $ 28,508 $ 28,646
Cost of revenues 64,250 64,964 21,524 22,272
--------- ---------- --------- ----------
Gross profit 19,785 19,130 6,984 6,374
--------- ---------- --------- ----------
Operating expenses
Sales and marketing 5,269 5,332 1,922 1,878
General and administrative 7,519 7,463 2,494 2,658
--------- ---------- --------- ----------
Total operating expenses 12,788 12,795 4,416 4,536
--------- ---------- --------- ----------
Operating income 6,997 6,335 2,568 1,838
Interest and marketable
securities income 432 319 131 97
Currency fluctuation and
other financing income (expenses), net (153) (367) 80 (649)
Changes in fair value of
embedded currency
conversion derivatives 923 (2,359) 611 (1,168)
Other expenses, net - (6) - (6)
--------- ---------- --------- ----------
Income before taxes on
income 8,199 3,922 3,390 112

Income taxes (2,337) (1,153) (946) (292)
--------- ---------- --------- ----------
Net income (loss) $ 5,862 $ 2,769 $ 2,444 $ (180)
========= ========== ========= ==========


RRsat Global Communications Network Ltd. and its Subsidiaries



Consolidated Statements of Operations (cont'd)




In thousands, except share data
Nine months ended Three months ended
----------------------- ---------------------------
September September September September
30 30 30 30
2012 2011 2012 2011
--------- ---------- --------- ----------
Income (loss) per ordinary share
Basic income (loss) per ordinary
share $0.34 $0.16 $0.14 $(0.01)
========= ========== ========= ==========
Diluted income (loss) per
ordinary share $0.34 $0.16 $0.14 $(0.01)
========= ========== ========= ==========
Weighted average number
of ordinary shares used to
compute basic income per
ordinary share 17,346,561 17,346,561 17,346,561 17,346,561
========= ========== ========= ==========
Weighted average number
of ordinary shares used to
compute diluted income
per ordinary share 17,346,561 17,346,561 17,346,561 17,346,561
========= ========== ========= ==========


RRsat Global Communications Network Ltd. and its subsidiaries



Reconciliation of Adjusted Net Income and Adjusted EBITDA




In thousands except share data
Nine months ended Three months ended
-------------------------- --------------------------
September September September September
30 30 30 30
2012 2011 2012 2011
--------- --------- --------- ---------
Reconciliation of Net
Income to Adjusted Net
Income:
Net income (loss) -
as reported $ 5,862 $ 2,769 $ 2,444 $ (180)
Non-cash equity-based
compensation charge 189 73 101 45
Intangible assets
amortization expense 138 179 41 58
Changes in fair value
of embedded currency
conversion derivatives (923) 2,359 (611) 1,168
Change in deferred tax
on embedded derivatives 231 (560) 152 (280)
--------- --------- --------- ---------
Adjusted net income $ 5,497 $ 4,820 $ 2,127 $ 811
========= ========= ========= =========
Adjusted net income per
diluted ordinary share $ 0.32 $ 0.28 $ 0.12 $ 0.05
Reconciliation of Net
Income to Adjusted EBITDA:
Operating income $ 6,997 $ 6,335 $ 2,568 $ 1,838
Non-cash equity-based
compensation charge 189 73 101 45
Depreciation and amortization 6,677 6,089 2,241 2,102
--------- --------- --------- ---------
Adjusted EBITDA $13,863 $12,497 $4,910 $3,985
========= ========= ========= =========


RRsat Global Communications Network Ltd. and its Subsidiaries



Consolidated Balance Sheets




In thousands except share data
September December
30 31
2012 2011
--------- --------
Current assets
Cash and cash equivalents $ 21,620 $ 14,443
Marketable securities 15,265 18,764
Accounts receivable:
Trade (net of provision for doubtful accounts of $8,112
and $6,892 as of September 30, 2012
and December 31, 2011, respectively) 19,325 19,402
Other 475 686
Fair value of embedded currency conversion derivatives 241 206
Deferred taxes 2,389 2,449
Prepaid expenses 2,845 2,223
--------- --------
Total current assets 62,160 58,173
Fair value of embedded currency conversion
derivatives 668 591
Long-term prepaid expenses 1,930 2,043
Long- term land lease prepaid expenses 7,586 7,642
Assets held for employee severance payments 1,783 1,757
Fixed assets, at cost, less accumulated
depreciation and amortization 42,688 45,495
Goodwill 3,734 3,734
Intangible Assets, at cost, less accumulated depreciation
and amortization 402 586
--------- --------
Total assets $ 120,951 $ 120,021
========= ========


RRsat Global Communications Network Ltd. and its Subsidiaries



Consolidated Balance Sheets (cont'd)




In thousands except share data
September December
30 31
2012 2011
--------- ---------
Liabilities and shareholders' equity
Current liabilities
Accounts payable:
Trade $ 11,562 $ 11,547
Other 3,305 2,335
Fair value of embedded currency
conversion derivatives 635 990
Deferred income 6,895 8,787
--------- ---------
Total current liabilities 22,397 23,659
--------- ---------
Long - term liabilities
Deferred income 8,799 7,192
Fair value of embedded currency
conversion derivatives 524 980
Liability in respect of employee severance payments 1,919 1,819
Deferred taxes 1,971 1,664
--------- ---------
Total long - term liabilities 13,213 11,655
--------- ---------
Total liabilities 35,610 35,314
--------- ---------
Commitments, contingent liabilities and liens
Shareholders' equity
Share capital:
Ordinary share NIS 0.01 par value each (20,000,000 shares
authorized as of September 30, 2012 and December 31, 2011;
17,346,561 shares issued and fully paid as of September 30,
2012 and December 31, 2011) 40 40
Additional paid in capital 53,199 53,010
Retained earnings 31,864 31,727
Accumulated other comprehensive gain (loss) 238 (70)
--------- ---------
Total shareholders' equity $ 85,341 $ 84,707
--------- ---------
Total liabilities and shareholders' equity $ 120,951 $ 120,021
========= =========


RRsat Global Communications Network Ltd. and its Subsidiaries



Consolidated Statements of Cash Flows




In thousands
Nine months ended Three months ended
--------------------------- --------------------------
September 30 September 30 September 30 September 30
2012 2011 2012 2011
------------ ------------ ------------ ------------
Cash flows from operating activities
Net income (loss) $ 5,862 $ 2,769 $ 2,444 $ (180)
Adjustments required to reconcile
net income to net cash provided by
operating activities
Depreciation and amortization 6,677 6,089 2,241 2,102
Provision for doubtful account 2,278 1,645 733 544
Deferred taxes 264 (55) 120 (176)
Discount accretion and
premium amortization
of available- for-
sale securities, net (317) (338) (94) (115)
Changes in liability for employee
severance payments, net 74 9 2 48
Stock- based compensation 189 73 101 45
Changes in fair value of embedded
currency conversion derivatives (923) 2,359 (611) 1,168
Loss (Profit) from trading
securities, net (64) 138 (9) 157
Capital gains on sale
of fixed assets, net - 6 - 6
Changes in assets and liabilities:
Increase in account
receivable - trade (2,202) (2,536) (1,251) (1,280)
Decrease in account
receivable - other 213 871 161 112
Decrease (increase)
in prepaid expenses (622) (183) 66 91
Decrease (increase) in
long- term prepaid expenses 113 181 (75) (37)
Increase (decrease)
in account payables 1,847 587 2,184 (1,069)
Increase (decrease)
in deferred income (285) (1,575) (573) 685
------------ ------------ ------------ ------------
Net cash provided by
operating activities $ 13,104 $ 10,040 $ 5,439 $ 2,101
------------ ------------ ------------ ------------


RRsat Global Communications Network Ltd. and its Subsidiaries



Consolidated Statements of Cash Flows (cont'd)



In thousands




Nine months ended Three months ended
September September September September
30 30 30 30
2012 2011 2012 2011
Cash flows from investing activities

Investment in fixed assets $(4,485) $(12,853) $ (1,308) $ (2,083)
Investment in long term
prepaid expenses (15) (22) (1) (9)
Investments in securities
available- for- sale (3,513) (4,781) (205) (641)
Decrease (increae) in
trading securities, net 1,512 (21) - (20)
Proceeds from securities
available- for- sale 6,291 7,944 1,578 2,105
Proceeds from sale of fixed assets 8 24 - 24
---------- ---------- ---------- ----------
Net cash used in
investing activities $ (202) $ (9,709) $ 64 $ (624)
---------- ---------- ---------- ----------
Cash flows from financing activities
Dividend paid $ (5,725) $ (4,163) $ (1,735) $ (1,561)
---------- ---------- ---------- ----------
Net cash used in
financing activities $ (5,725) $ (4,163) $ (1,735) $ (1,561)
---------- ---------- ---------- ----------
Increase (decrease) in cash
and cash equivalents $ 7,177 $ (3,832) $ 3,768 $ (84)
Balance of cash and cash equivalents
at beginning of period 14,443 13,091 17,852 9,343
---------- ---------- ---------- ----------
Balance of cash and cash equivalents at
end of period $ 21,620 $ 9,259 $ 21,620 $ 9,259
========== ========== ========== ==========
A. Non-cash transactions
Investment in fixed assets $ 431 $ 724 $ 431 $ 724
========== ========== ========== ==========
B. Supplementary cash flow information
Income taxes paid, net $ 798 $ 1,104 $ 939 $ 402
========== ========== ========== ==========



Company Contact Information:
Itzhak Zion, CFO
Tel: +972-3-928-0777
Email: investors@rrsat.com

Investor Relations Contacts:
Ehud Helft & Kenny Green at CCG Israel
Tel: +1-646-201-9246
rrsat@ccgisrael.com


RRSat Global Communications Network Ltd


-------
Profile: intent