Claxson Reports 2004 Third Quarter Financial Results Company
Continues to Move Along a Path of Profitability, Pay TV and
Broadcast Divisions Outperform Last Year BUENOS AIRES, Argentina,
Nov. 17 /PRNewswire-FirstCall/ -- Claxson Interactive Group Inc.
(OTC:XSON) (BULLETIN BOARD: XSON) ("Claxson" or the "Company"),
today announced financial results for the three- and nine-month
periods ended September 30, 2004. Financial Highlights Third
Quarter 2004 Net revenue for the third quarter of 2004 was $24.4
million, a 16% increase from net revenue of $21.1 million for the
third quarter of 2003. Operating expense for the three months ended
September 30, 2004 was $22.0 million, a 22% increase from the $18.1
million for the third quarter of 2003. Operating income was $2.3
million for the three-month period ended September 30, 2004
compared to $3.0 million for the three-month period ended September
30, 2003. Foreign currency exchange gain for the three-month period
ended September 30, 2004 was $0.1 million compared to a foreign
exchange loss of $1.5 million for the three-month period ended
September 30, 2003. Net income for the three months ended September
30, 2004 was $1.9 million ($0.10 per common and diluted share),
compared to a $0.5 million loss ($0.03 per common and diluted
share) for the same period in 2003. During the third quarter of
2004, the average exchange rate of the Argentine and Chilean
currencies compared to the U.S. dollar depreciated 4% and
appreciated 9%, respectively, versus the same period in 2003. First
Nine Months of 2004 Net revenue for the nine-month period ended
September 30, 2004 was $67.7 million, a 14% increase compared to
$59.3 million for the same period in 2003. Operating expense for
the nine-month period ended September 30, 2004 was $61.3 million
compared to $57.5 million in the same period of 2003. Operating
income was $6.4 million for the nine-month period ended September
30, 2004 compared to $1.8 million for the same period in 2003.
Foreign currency exchange loss for the nine-month period ended
September 30, 2004 was $0.7 million, a $9.2 million difference with
the $8.5 million foreign currency exchange gain for the same period
of 2003. Consequently, net income for the nine-month period ended
September 30, 2004 was $4.4 million ($0.23 per common share and
$0.22 per diluted share), versus $7.2 million ($0.39 per common and
diluted share) for the same period in 2003. During the nine-month
period ended September 30, 2004, the average exchange rate of the
Chilean currency compared to the U.S. dollar appreciated 13%, while
the Argentine currency remained unchanged versus the same period in
2003. CLAXSON UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
INFORMATION - BY SEGMENT (In Thousands of U.S. dollars) Operating
Consolidated expenses Depreciation Operating Net (before depr.
& Total Income Revenues and amort.) amortization expenses
(loss) For the Three Months Ended September 30, 2004 Pay TV $12,773
$9,852 $797 $10,649 $2,124 Broadcast 11,584 9,339 662 10,001 1,583
Broadband & Internet 19 265 -- 265 (246) Corporate -- 1,117 --
1,117 (1,117) Total $24,376 $20,573 $1,459 $22,032 $2,344 2003 Pay
TV $12,393 $8,706 $710 $9,416 $2,977 Broadcast 8,625 6,330 730
7,060 1,565 Broadband & Internet 85 574 -- 574 (489) Corporate
-- 1,090 -- 1,090 (1,090) Total $21,103 $16,700 $1,440 $18,140
$2,963 Operating Consolidated expenses Depreciation Operating Net
(before depr. & Total Income Revenues and amort.) amortization
expenses (loss) For the Nine Months Ended September 30, 2004 Pay TV
$36,462 $28,791 $2,433 $31,224 $5,238 Broadcast 31,122 24,172 2,036
26,208 4,914 Broadband & Internet 76 805 7 812 (736) Corporate
-- 3,021 -- 3,021 (3,021) Total $67,660 $56,789 $4,476 $61,265
$6,395 2003 Pay TV $36,252 $29,315 $2,448 $31,763 $4,489 Broadcast
22,901 18,101 2,066 20,167 2,734 Broadband & Internet 169 1,997
7 2,004 (1,835) Corporate -- 3,597 -- 3,597 (3,597) Total $59,322
$53,010 $4,521 $57,531 $1,791 "We are very pleased with the overall
results for the third quarter and first nine months of 2004. Our
net revenues improved significantly compared to last year and, in
spite of higher operating expenses, we delivered a larger quarterly
net profit," said Roberto Vivo, Chairman and CEO. "We're especially
pleased with the performance of the broadcasting and pay TV units,
as they continue to outperform last year's results on a
year-to-date basis." PAY TV Net revenue for the third quarter of
2004 was $12.8 million, a 3% increase from net revenue of $12.4
million for the third quarter of 2003. The increase in net revenue
is principally attributable to an increase in subscriber-based fees
and advertising sales due to an improvement of the advertising
market throughout the region. Net revenue for the nine-month period
ended September 30, 2004 was $36.5 million compared to $36.3
million for the same period of 2003. The increase is explained by
increased advertising and subscriber-based fee revenues, offset by
a decrease of $1.4 million in production and other services as a
result of the cancellation of services provided to the Locomotion
Channel and other third parties. Operating expense (before
depreciation and amortization) for the third quarter of 2004 was
$9.9 million compared to $8.7 million for the same period in 2003.
The increase is principally attributable to higher programming
expenditures as a result of increased original productions.
Operating expense (before depreciation and amortization) for the
nine-month period ended September 30, 2004 was $28.8 million
compared to $29.3 million for the same period of 2003. Operating
income for the third quarter of 2004 was $2.1 million compared to
an operating income of $3.0 million for the same period in 2003.
Operating income for the nine-month period ended September 30, 2004
was $5.2 million compared to $4.5 million for the same period of
2003. As of September 30, 2004, the Company's owned basic and
premium channels reached 41.6 million aggregate subscribers, an 18%
growth compared to its subscriber base as of September 30, 2003.
Playboy TV, FTV, and Retro were the Company's channels that
reported the strongest growth compared to the same period in 2003.
BROADCAST Net revenue for the third quarter of 2004 was $11.6
million, a 35% increase from net revenue of $8.6 million for the
third quarter of 2003. The increase is primarily attributable to
improved ratings of Chilevision that enabled the channel to
increase its advertising revenue mainly through better pricing, as
well as a 9% appreciation in the Chilean peso as compared to 2003.
Net revenue for the nine-month period ended September 30, 2004 was
$31.1 million compared to $22.9 million for the same period of
2003. This difference is a result of the increased audience share
of Chilevision as well as a 13% appreciation of the Chilean peso as
compared to same period in 2003. Operating expense (before
depreciation and amortization) for the third quarter of 2004 was
$9.3 million compared to $6.3 million for the same period in 2003.
The increase is due to the appreciation of the Chilean peso, the
increase in sales and marketing costs directly related to the
increase in revenues, as well as the increase in production costs
as a result of a higher number of original production hours
incurred by Chilevision to achieve its ratings growth. Operating
expense (before depreciation and amortization) for the nine-month
period ended September 30, 2004 was $24.2 million compared to $18.1
million for the same period of 2003. As was the case in the third
quarter, this increase is due to the appreciation of the Chilean
peso, the increase in sales and marketing costs and the increase in
production expenditures at Chilevision. Operating income for the
third quarter of 2004 was $1.6 million, unchanged from the same
period in 2003. Operating income for the nine-month period ended
September 30, 2004 was $4.9 million compared to $2.7 million for
the same period of 2003. During the third quarter of 2004,
Chilevision reported an average audience share of 14.5%, compared
to 13.0% for the same period in 2003. Chilevision's average
audience share for the nine-month period ended September 30, 2004
was 15.1%, compared to 14.2% for the same period in 2003. Ibero
American Radio Chile's average audience share for the nine-month
period ended September 30, 2004 was 35.7%, unchanged from the same
period in 2003. In line with the Company's long-term growth plans,
Claxson agreed to sell Red de Television Chilevision S.A., its
Chilean television network. Completion of the sale is conditioned
upon, among other things, successful negotiation of an exclusivity
agreement with the bidder, payment by the bidder of an exclusivity
fee, satisfactory completion of diligence by the proposed buyer,
negotiation of a definitive purchase and sale agreement, approval
of the Board of Directors of Claxson and receipt of regulatory
approval. The Company intends to disclose the name of the purchaser
upon execution of an exclusivity agreement. BROADBAND &
INTERNET Net revenue for the third quarter of 2004 decreased to
$19,000 from $85,000 for the third quarter of 2003. Net revenue for
the nine-month period ended September 30, 2004 decreased to $76,000
compared to $169,000 for the same period of 2003. Operating expense
(before depreciation and amortization) for the third quarter of
2004 was $0.3 million compared to $0.6 million for the same period
in 2003. Operating expense (before depreciation and amortization)
for the nine-month period ended September 30, 2004 was $0.8 million
compared to $2.0 million for the same period of 2003. Operating
loss for the third quarter of 2004 was $0.2 million compared to a
$0.5 million loss for the same period in 2003. Operating loss for
the nine- month period ended September 30, 2004 was $0.7 million
compared to $1.8 million for the same period of 2003. During the
month of October, 2004, the Broadband & Internet Division
entered into a number of new agreements as a result of the
Company's R&D investment and recent sales and marketing efforts
related to its advanced broadband content manager, El Sitio Digital
Channel (ESDC), including: * content agreements with Fox Sports
Latin America and with the leading Latin-American women's channel
Utilisima, to offer its content to wall-garden broadband
communities in Latin America. * an agreement with Brasil Telecom,
the second largest broadband company in Latin America and one of
the largest telecommunications companies in Brazil, to launch in
Brazil the Turbo Video VOD (Video On Demand) service on its ESDC
platform. Through this agreement, Brasil Telecom users will have
access to the digital content offered in the ESDC digital platform
including content from Fox Sports Latin America, Playboy TV Latin
America & Iberia, Utilisima and Claxson's own pay television
channels. * an agreement with Microsoft to provide broadband
content through its ESDC broadband platform to its Windows Media
Player 10 (WMP 10), the new Windows Media Player version recently
launched worldwide.. Through this agreement, Claxson will become
the only provider of video content for Microsoft's new product in
Latin America, offering DVD quality programming from its content
partners and its pay television channels, as well as a Reuters news
channel. Statement of Cash Flows and Liquidity As of September 30,
2004, Claxson had cash and cash equivalents of $7.2 million and
$87.4 million in debt, which includes $16.7 million in future
interest payments on the Company's 8.75% Senior Notes due in 2010.
For the nine-month period ended September 30, 2004, Claxson
operating activities generated cash flows of $3.3 million compared
to $12.2 million for the same period of 2003. The difference is
primarily due to efforts to reduce accounts payable balances
resulting from the Company's cash management strategy during
previous years. Cash generated from operating activities was
primarily used for capital expenditures, the repayment of debt and
the payment of fees related to the Claxson formation transaction.
Net cash used for financing activities was $1.2 million as a result
of the issuance of $3.5 million in Convertible Debentures during
the third quarter of 2004, the renegotiation of the Chilean
syndicated financing, the re-payment of debt and the release of the
escrowed amounts. During the nine-month period ended September 30,
2004, Claxson received $0.6 million as the last installment from
the sale of its investment in the Locomotion Channel in 2002. For
the nine-month period ended September 30, 2004, Claxson had a net
use of cash of $0.5 million. Investment in Digital Latin America In
line with Claxson's long-term affiliate sales growth strategy,
especially for its premium brands, on October 29, 2004, funds
associated with Hicks Muse Tate & Furst ("Hicks Muse")
purchased 830,259 newly issued Class A Common Shares of Claxson,
increasing the ownership percentage of Hicks Muse to 38% of
Claxson. As part of the $4.5 million transaction, Hicks Muse also
received a 38% equity ownership interest in DLA Holdings, Inc., a
newly formed holding company for Digital Latin America, LLC, which
provides programming to cable operators throughout Latin America
for their digitals tiers, including an interactive programming
guide, digital music and pay-per-view services of Hollywood movies.
As part of the transaction, Claxson obtained 48% of the equity
interest in DLA Holdings in exchange for investment of funds and an
agreement to provide services (including satellite space, playout
of its channels and back-office support) for a period of up to
three years. The balance of DLA Holdings, Inc. is owned by an
affiliate of Motorola. About Claxson Claxson (OTC:XSON) (BULLETIN
BOARD: XSON) is a multimedia company providing branded
entertainment content targeted to Spanish and Portuguese speakers
around the world. Claxson has a portfolio of popular entertainment
brands that are distributed over multiple platforms through its
assets in pay television, broadcast television, radio and the
Internet. Headquartered in Buenos Aires, Argentina, and Miami,
Florida, Claxson has a presence in the United States and all key
Ibero-American countries, including without limitation, Argentina,
Mexico, Chile, Brazil, Spain and Portugal. Claxson's principal
shareholders are the Cisneros Group of Companies and funds
affiliated with Hicks, Muse, Tate & Furst Inc. This press
release contains forward-looking statements within the meaning of
the "safe harbor" provisions of the U.S. Private Securities
Litigation Reform Act of 1995. These statements are based on the
current expectations or beliefs of Claxson's management and are
subject to a number of factors and uncertainties that could cause
actual results to differ materially from those described in the
forward-looking statements. For a detailed discussion of these
factors and other cautionary statements, please refer to Claxson's
annual report on Form 20F filed with the U.S. Securities and
Exchange Commission on July 15, 2004. -- Financial Tables Follow --
CLAXSON UNAUDITED BALANCE SHEETS (In Thousands of U.S. dollars) As
of As of September 30, December 31, 2004 2003 ASSETS CURRENT
ASSETS: Cash and cash equivalents $7,176 $7,682 Restricted
investments -- 213 Accounts receivable, net 25,342 25,270 Other
current assets 7,072 7,388 Total current assets 39,590 40,553
RESTRICTED INVESTMENTS -- 750 PROPERTY AND EQUIPMENT, net 16,951
19,107 PROGRAMMING RIGHTS, net 5,669 4,804 INVESTMENTS IN
UNCONSOLIDATED SUBSIDIARIES 1,172 1,061 INVESTMENTS IN EQUITY
SECURITIES 83 54 GOODWILL 52,976 53,627 BROADCAST LICENSES 19,740
21,160 OTHER ASSETS 5,202 4,223 TOTAL ASSETS $141,383 $145,339
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts
payable, accrued and other liabilities $26,074 $30,824 Current
portion of programming rights obligations 8,982 10,082 Current
portion of long-term debt 9,588 11,925 Total current liabilities
44,644 52,831 LONG-TERM LIABILITIES: Long-term debt, net of current
portion 77,794 76,194 Other long-term liabilities 4,287 5,193 Total
long-term liabilities 82,081 81,387 MINORITY INTEREST 776 1,128
SHAREHOLDERS' EQUITY 13,882 9,993 TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $141,383 $145,339 CLAXSON UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands of U.S.
dollars, except per share data) Three Months Nine Months Ended
Ended September 30, September 30, 2004 2003 2004 2003 NET REVENUES:
Subscriber-based fees $10,261 $10,135 $29,700 $29,267 Advertising
12,971 9,712 34,961 25,624 Production services 783 735 2,111 2,262
Other 361 521 888 2,169 Total net revenues 24,376 21,103 67,660
59,322 OPERATING EXPENSES: Product, content and technology 11,457
9,231 32,306 26,700 Marketing and sales 4,928 3,409 11,972 10,073
Corporate and administration 4,188 4,060 12,511 13,479 Depreciation
and amortization 1,459 1,440 4,476 4,521 Impairment of goodwill --
-- -- 2,758 Total operating expenses 22,032 18,140 61,265 57,531
OPERATING INCOME (LOSS) 2,344 2,963 6,395 1,791 INTEREST EXPENSE
(538) (456) (1,537) (1,710) OTHER INCOME (EXPENSE), NET 282 (892)
227 (47) FOREIGN CURRENCY EXCHANGE GAIN (LOSS) 66 (1,474) (693)
8,458 NET GAIN FROM UNCONSOLIDATED AFFILIATES 114 80 989 185
PROVISION FOR INCOME TAXES (392) (680) (1,044) (1,514) MINORITY
INTEREST 49 (37) 52 47 NET INCOME $1,925 $(496) $4,389 $7,210 NET
INCOME PER COMMON SHARE (Basic) $0.10 $(0.03) $0.23 $0.39 NET
INCOME PER COMMON SHARE (Diluted) $0.10 $(0.03) $0.22 $0.39 NUMBER
OF SHARES USED IN PER SHARE CALCULATIONS (Basic) 19,481 18,751
19,461 18,703 NUMBER OF SHARES USED IN PER SHARE CALCULATIONS
(Diluted) 19,860 18,751 19,891 18,703 CLAXSON UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of U.S.
dollars) Nine Months Ended September 30, 2004 2003 CASH FLOWS FROM
OPERATING ACTIVITIES: Net income $4,389 $7,210 Adjustments to
reconcile net loss to net cash (used in) provided by operating
activities: Amortization of programming rights 3,992 3,166
Share-based compensation 52 36 Depreciation and amortization 4,476
4,521 Accrued and unpaid interest 546 105 Exchange rate (gain) loss
693 (8,458) Impairment of goodwill -- 2,758 Net loss on disposal of
assets 27 208 (Gain) from unconsolidated subsidiaries (989) (185)
Minority interest (52) (47) Changes in operating assets and
liabilties (9,874) 2,908 Net cash provided by operating activities
3,260 12,222 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of
property and equipment (1,745) (1,830) Payments for acquisition of
minority interest -- (2,416) Transaction costs paid (1,438) (1,869)
Dividends distributions to minority owners of subsidiaries (380) --
Investment in unconsolidated subsidiaries -- (154) Dividends from
unconsolidated subsidiaries 247 62 Proceeds on sale of investment
in unconsolidated subsidiaries 625 837 Net cash (used in) provided
by investing activities (2,691) (5,370) CASH FLOWS FROM FINANCING
ACTIVITIES: Proceeds from issuance of convertible debentures 3,500
-- Net repayments of short/long-term debt (5,695) (6,571)
Restricted cash released in guaranty of Chilean syndicated loan 907
706 Proceeds from excersiced stock options 55 -- Net cash used in
financing activities (1,233) (5,865) EFFECT OF FOREIGN CURRENCY
TRANSLATION ON CASH AND CASH EQUIVALENTS 158 (548) NET DECREASE IN
CASH AND CASH EQUIVALENTS (506) 439 CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 7,682 8,072 CASH AND CASH EQUIVALENTS, END OF
PERIOD $7,176 $8,511 DATASOURCE: Claxson Interactive Group, Inc.
CONTACT: Media, Alfredo Richard, SVP of Communications,
+1-305-894-3588, or Investors, Jose Antonio Ituarte, Chief
Financial Officer in Argentina, +011-5411-4339-3700, both of
Claxson Web site: http://www.claxson.com/
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