TV Azteca Announces 1Q05 EBITDA of Ps.630 Million (US$56 Million)
With a 38% Margin - Net Sales Up 4%, to All-Time Record Level for a
1Q- MEXICO CITY, April 20 /PRNewswire-FirstCall/ -- TV Azteca, S.A.
de C.V. (NYSE: TZA; BMV: TVAZTCA, Latibex: XTZA), one of the two
largest producers of Spanish language television programming in the
world, announced today first quarter net sales up 4% to a record
level of Ps.1,668 million (US$148 million), and EBITDA of Ps.630
million (US$56 million), unchanged from the prior year period.
EBITDA margin for the quarter was 38%. "Despite challenging
comparables due to fewer working days and the Holy Week this
quarter, we managed to deliver the highest 1Q revenue level ever
recorded by the company," said Mario San Roman, Chief Executive
Officer of TV Azteca. "Solid drivers of growth in Mexico and in the
US allowed us to continue with an uninterrupted trend of five years
of top line increases." "On the strategic front, in close adherence
to our cash-usage plan, we are on track to submit for shareholders'
approval later this month distributions of US$80 million planned
for 2005, as previously approved by our board," added Mr. San
Roman. As has been detailed, the company's plan for uses of cash
entails distributions of over US$500 million and reductions in TV
Azteca's debt by approximately US$250 million within a six-year
period that started in 2003. First Quarter Results Net sales grew
4% to a record high of Ps.1,668 million (US$148 million), up from
Ps.1,607 million (US$142 million) for the same quarter of 2004.
Total costs and expenses rose 6% to Ps.1,038 million (US$92
million), from Ps.979 million (US$87 million) for the same period
last year. The company reported EBITDA of Ps.630 million (US$56
million), compared with Ps.628 million (US$56 million) in the first
quarter of 2004. Net income was Ps.202 million (US$18 million), 6%
higher than Ps.191 million (US$17 million) for the same period of
2004. Millions of pesos(1) and dollars(2) except percentages and
per share amounts. Change Net Sales 1Q 2004 1Q 2005 US$ % Pesos Ps.
1,607 Ps. 1,668 US$ US$ 142 US$ 148 5 +4% EBITDA(3) Pesos Ps. 628
Ps. 630 US$ US$ 56 US$ 56 0 0% Net Income Pesos Ps. 191 Ps. 202 US$
US$ 17 US$ 18 1 +6% Income per ADS(4) Pesos Ps. 1.03 Ps. 1.09 US$
US$ 0.09 US$ 0.10 0.01 +6% (1) Pesos of constant purchasing power
as of March 31, 2005. (2) Conversion based on the exchange rate of
Ps.11.29 per US dollar as of March 31, 2005. (3) EBITDA is
Operating Profit Before Depreciation and Amortization under Mexican
GAAP. (4) Calculated based on 185 million ADSs outstanding as of
March 31, 2005. Net Sales "Favorable economic conditions
domestically, together with targeted programming initiatives
boosted sales in Mexico to record-high levels," said Mr. San Roman.
"Adding to the domestic dynamism, Azteca America further
contributed to consolidated top line expansion, with increases at
both the network and the Los Angeles station." First quarter
revenue includes sales from Azteca America-the company's
wholly-owned broadcasting network focused on the US Hispanic
market-of Ps.79 million (US$7 million), a 16% increase from Ps.68
million (US$6 million) for the same period a year ago. Azteca
America revenue this quarter was comprised of Ps.43 million (US$4
million) in sales from the Los Angeles station KAZA-TV, and Ps.35
million (US$3 million) from network sales. TV Azteca also reported
sales of programming to other countries of Ps.33 million (US$3
million), compared with Ps.38 million (US$3 million) in the same
period a year ago. This quarter's programming exports were
primarily driven by the company's novelas La Otra Mitad del Sol,
sold in Latin America, as well as La Hija del Jardinero, which was
sold in European and Latin American markets. TV Azteca reported
Ps.33 million (US$3 million) in advertising sales to Unefon,
compared with Ps.35 million (US$3 million) in the first quarter of
2004. In accordance with the terms of the advertising agreement
between Unefon and TV Azteca, during the first quarter Unefon paid
to TV Azteca in cash the Ps.33 million (US$3 million) of
advertising purchases placed within the prior three month period.
During the first quarter of 2005, content and advertising sales to
Todito.com were Ps.29 million (US$3 million), compared with Ps.73
million (US$6 million) in the same period of the prior year. This
quarter marked the end of a five-year service contract, entered in
February 2000, in which TV Azteca acquired 50% of Todito.com. The
service contract provided for advertising time to Todito.com on TV
Azteca networks, the exclusive online use of the company's content
by Todito.com, and TV Azteca sales support to sell online
advertising on Todito.com. The value of the service agreement was
US$100 million at the time of the contract's execution. Barter
sales were Ps.65 million (US$6 million), compared with Ps.54
million (US$5 million) in the same period of last year. Inflation
adjustment of advertising advances was Ps.53 million (US$5
million), compared with Ps.54 million (US$5 million) for the first
quarter of 2004. Costs and Expenses The 6% increase in first
quarter costs and expenses resulted from the combined effect of a
10% rise in programming, production and transmission costs to
Ps.766 million (US$68 million), from Ps.694 million (US$61 million)
in the prior year period, and a 5% decrease in administration and
selling expense to Ps.272 million (US$24 million), from Ps.285
million (US$25 million) in the same quarter a year ago. "Within the
dynamic economic environment in Mexico, we developed a number of
programming initiatives to better tap a rising domestic market,"
said Carlos Hesles, Chief Financial Officer of TV Azteca. "The
programming efforts increased production costs, and simultaneously
provided advertisers with ample choices to reach their target
markets, which had a positive effect on net sales." Consistent with
the increased production efforts this quarter, TV Azteca's in-house
produced content rose to 2,278 hours in the three month period a 9%
rise from 2,093 hours a year ago. The 5% reduction in
administration and selling expense reflects lower operating,
services, personnel and travel expenses in the first quarter,
despite increasing operations in Mexico and the US. EBITDA and Net
Income The 4% increase in first quarter net sales, combined with
the 6% growth in costs and expenses, resulted in EBITDA of Ps.630
million (US$56 million), compared with Ps.628 million (US$56
million) a year ago. The EBITDA margin was 38%, compared with 39%
in the same period of 2004. Below EBITDA, the company recorded
depreciation and amortization of Ps.97 million (US$9 million) from
Ps.102 million (US$9 million) a year ago, primarily reflecting a
Ps.4 million (US$0.4 million) decline in the depreciation line due
to increases in fully depreciated assets this quarter. The company
recorded other expense of Ps.105 million (US$9 million), compared
with Ps.106 million (US$9 million) a year ago. Other expense for
the quarter was primarily comprised of legal fees of Ps.40 million
(US$4 million), unchanged from the first quarter a year ago,
charitable donations of Ps.39 million (US$3 million), the
recognition of 50% of the net loss of Todito.com of Ps.15 million
(US$1 million), pre-operating expenses of Azteca America of Ps.10
million (US$1 million), and the net effect of the recognition of
the results from Monarcas-TV Azteca's soccer team-and other items
of Ps.1 million (US$0.1 million). Net comprehensive financing cost
during the quarter was Ps.181 million (US$16 million) compared with
Ps.179 million (US$16 million) a year ago. There was a Ps.33
million (US$3 million) decrease in interest income primarily
resulting from a reduction in the company's cash balance.
Additionally, foreign exchange gain decreased Ps.12 million (US$1
million) due to a reduction in TV Azteca's US$ monetary position.
Other financing expense rose Ps.7 million (US$1 million) reflecting
the payment of tax surcharges. Increases in net comprehensive
financing cost were partly offset by a Ps.45 million (US$4 million)
reduction in loss on monetary position resulting from symmetry of
the company's monetary assets and liabilities for the quarter.
Provision for income tax was Ps.45 million (US$4 million), compared
with Ps.50 million (US$4 million) in the same period of the prior
year, reflecting similar taxable bases among the quarters. Net
income for the period was Ps.202 million (US$18 million), up 6%
from Ps.191 million (US$17 million) for the same quarter of 2004.
Azteca America During the quarter, TV Azteca signed a distribution
agreement in which EchoStar Communication Corporation's DISH
Network made Azteca America available nationwide via satellite
television, starting on April 1, 2005. The parties signed a
contract through which the Azteca America channel will be available
as part of EchoStar's DISH Latino programming packages, and settled
all prior disputes. EchoStar has also obtained the right to air the
24-hour live transmission of the company's musical reality show, La
Academia 4, on another EchoStar channel. "We are thrilled that
viewers will now be able to turn from seeing TV Azteca's channel 13
to our Network's programming, allowing Azteca America to benefit
from the tremendous subscriber growth that EchoStar has established
during the past five years," said Luis J. Echarte, President and
CEO of Azteca America. Azteca America Network's signal is seen
through 39 affiliate stations across the US, of which 30 have cable
carriage and, in most cases, also satellite transmission. The
company anticipates that Azteca America Network's positive results
in reaching a growing number of US Hispanic markets will lead
advertisers to consider it a consolidated national network for the
upcoming US upfront season. Debt Outstanding As of March 31, 2005,
the company's total outstanding debt was Ps.6,470 million (US$573
million). TV Azteca's cash balance was Ps.1,062 million (US$94
million), resulting in net debt of Ps.5,408 million (US$479
million). The total debt to last twelve months (LTM) EBITDA ratio
was 1.8 times, and net debt to EBITDA was 1.5 times. LTM EBITDA to
net interest expense ratio was 5.8 times. Excluding-for analytical
purposes-Ps.1,353 million (US$120 million) debt due 2069, total
debt was Ps.5,117 million (US$453 million), and total debt to
EBITDA ratio was 1.4 times. Management Oversight As previously
announced, on November 24, 2004 the company's shareholders approved
measures for management oversight, which were approved by TV
Azteca's board on October 19, 2004. The company has advanced in its
implementation, as follows. TV Azteca has completed the formation
of its nominations committee with Ignacio Morales Lechuga, Notary
Public, former Mexico's General Prosecutor, and Dean of the Escuela
Libre de Derecho-one of Mexico's top law schools- Jos� Represas,
Counsel for International Businesses and former President and CEO
of Nestle Mexico, and Andres Holzer, a renowned Mexican investor,
with activities in the manufacturing, services and real estate
sectors. The nominations committee will propose prospective
independent board members for appointment by the company's
shareholders. TV Azteca has named Pedro Zamora, former Enforcement
Vice President at the Mexican Banking and Securities Commission
(CNBV) as the company's Chief Oversight Officer. Mr. Zamora will
supervise the compliance of the code of business conduct and ethics
of the company. Pursuant to the resolution of the November 24, 2004
shareholders' meeting, TV Azteca included in its bylaws a new Audit
Committee, which will consist of three independent directors, who
will take over, among others, the current responsibilities of the
Related Party Transactions Committee. The company's Nominations
Committee will propose the members of the Audit Committee to the
shareholders as discussed above. TV Azteca noted that the rest of
the management oversight measures are in process of implementation,
and are expected to be presented to the company's shareholders for
final approval prior to May 31. SEC Case As previously announced,
on January 4 the US Securities and Exchange Commission (SEC) issued
a press release informing that it filed a civil action against the
company, its parent company, Ricardo B. Salinas, founder, chairman
and majority shareholder, and Pedro Padilla L., board member and
former CEO, in a US Federal Court. TV Azteca is certain that the
company, and its officers and directors acted in full compliance
with the applicable legal framework and are determined to continue
to do so, and to firmly defend what they believe to be correct. The
company, its officers and directors believe they will prevail
because they acted correctly. Unefon Holdings As was previously
detailed, on October 6, 2003 TV Azteca's board unanimously approved
the split off of the company's 46.5% equity stake in Unefon and a
50% stake in Cosmofrecuencias, a wireless broadband Internet access
provider. On December 19 of the same year, TV Azteca shareholders
ratified the separation of TV Azteca's telecommunications assets
through the creation of Unefon Holdings, returning TV Azteca to a
pure media company. Unefon Holdings became a legal Mexican entity
independent from TV Azteca that same month. On July 2004 Unefon
Holdings began the registration process with the Mexican Banking
and Securities Commission (CNBV) and the Mexican Stock Exchange
(BMV) to have its shares listed on the BMV. Previously, Unefon
Holdings applied to the SEC for an exemption from registration of
its shares in the US, to allow for over-the-counter trading in the
United States. Public trading of Unefon Holdings will allow TV
Azteca shareholders to receive the value of the telecommunications
business, and decide their participation in Unefon Holdings. The
SEC granted the exemption on October, 2004. Notwithstanding the
CNBV made several requests for additional financial and operating
information for Unefon Holdings, which has impeded Unefon Holdings
from obtaining its registration. Unefon Holdings has not received a
decision, nor a date of a potential definition of the listing on
the BMV from Mexican authorities. TV Azteca does not know the
reasons for the delays at the CNBV, but is certain that the lengthy
decision making process adversely affects the company's minority
shareholders, who are not allowed to make investment decisions
regarding Unefon Holdings. Company Profile TV Azteca is one of the
two largest producers of Spanish language television programming in
the world, operating two national television networks in Mexico,
Azteca 13 and Azteca 7, through more than 300 owned and operated
stations across the country. TV Azteca affiliates include Azteca
America Network, a new broadcast television network focused on the
rapidly growing US Hispanic market, and Todito.com, an Internet
portal for North American Spanish speakers. Except for historical
information, the matters discussed in this press release are
forward-looking statements and are subject to certain risks and
uncertainties that could cause actual results to differ materially
from those projected. Risks that may affect TV Azteca are
identified in its Form 20-F and other filings with the US
Securities and Exchange Commission. For more information:
http://www.irtvazteca.com/ DATASOURCE: TV Azteca, S.A. de C.V.
CONTACT: Investors, Bruno Rangel, +5255-3099-9167, or ; or Media,
Tristan Canales, +5255-1720-5786, or , or Daniel McCosh,
+5255-1720-0059, or , all of TV Azteca, S.A. de C.V. Web site:
http://www.tvazteca.com.mx/
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