SBS Broadcasting SA Reports Second Quarter 2005 Results SECOND
QUARTER LUXEMBOURG, July 28 /PRNewswire-FirstCall/ -- SBS
Broadcasting SA (Nasdaq: SBTV; Euronext Amsterdam N.V.: SBS) today
reported financial results for the three and six months ended June
30, 2005. Results, which are attached, are in thousands of euro
(except share and per share data) converted from local currencies.
The following report should be read in conjunction with the
accompanying unaudited financial statements. Financial highlights
are as follows: Three months ended June 30, Six months ended June
30, 2004 2005 % change 2004 2005 % change (all in thousands of
euro, except share and per share data) Net revenue(1) 187,207
243,554 30% 327,881 414,354 26% Adjusted EBITDA(1)(2) 41,897 55,670
33% 46,510 63,814 37% Operating income(1) 34,899 45,070 29% 32,377
45,258 40% Net income(3) 18,130 14,387 (21%) 14,224 11,296 (21%)
Net income per common share - basic 0.58 0.44 0.46 0.35 Weighted
average common shares 31,138 32,649 31,107 32,308 Cash provided by
operating activities 15,764 37,966 4,353 49,678 Adjusted EBITDA
margin(4) 22.3% 22.9% 14.2% 15.4% (1) Excluding the impact of our
newly acquired businesses, C More, Prima TV and the Romanian Radio
operations, and the recently launched television stations, The
Voice TV, VijfTV and Irisz, net revenue increased euro 32,025, or
10%, adjusted EBITDA increased euro 14,937, or 32%, and operating
income increased euro 14,235, or 44%, in the six months ended June
30, 2005. (2) Adjusted EBITDA is defined as operating income plus
non-cash compensation, depreciation and amortization expenses. (3)
The net income for the three and six months ended June 30, 2005
include a loss on the extinguishment of our 12% Senior Notes of
euro 8,472, compared to a loss of euro 2,463 on the extinguishment
of euro 14.5 million of our 12% Senior Notes in the three and six
months ended June 30, 2004. (4) Adjusted EBITDA margin is adjusted
EBITDA expressed as a percentage of net revenue. Commenting on the
results, Markus Tellenbach, Chief Executive Officer of SBS, said:
"We continued to produce solid operating results and strong cash
flow generation across our asset base. Our strong performance
during the second quarter was highlighted by the improved operating
results of our television stations in Hungary, Sweden and Norway as
we benefited from new programming initiatives and improving
advertising markets. We also benefited from recent strategic
investments, including our C More and Romanian acquisitions and the
launch of our new digital entertainment services. "We remain
focused on implementing our growth strategy and seek to expand the
scope of our business, thereby further diversifying our revenue
streams while creating additional cash flows. With a strong balance
sheet, including a new bank facility that significantly lowers our
cost of capital, we believe we are well positioned to grow our core
operations and capitalize on new opportunities to increase
shareholder value." Recent Developments Refinancing On March 7,
2005, we entered into a euro 300,000 unsecured bridge facility
agreement with ABN AMRO Bank N.V. ("ABN AMRO") and then drew down
euro 210,000 in order to finance in part our acquisition of C More.
On May 12, 2005, we entered into a euro 325,000 secured syndicated
multicurrency revolving credit facility (the "Facility") with ABN
AMRO, Citigroup Global Markets Limited, Deutsche Bank AG London and
The Royal Bank of Scotland plc, as lead arrangers. Financing costs
paid for the bridge facility were refunded to us in full when we
executed the Facility agreement. In connection with the Facility,
we called for redemption all of our 12% Senior Notes due 2008 (the
"Senior Notes"), which had an outstanding principal amount of euro
103,655. Holders of the Senior Notes received a redemption price of
106% plus accrued and unpaid interest on June 15, 2005. The
redemption premium plus deferred financing cost related to the
Senior Notes, euro 8,472, was recognized as a loss on
extinguishment of debt in the three months ended June 30, 2005. We
funded the redemption of the Senior Notes with funds drawn under
the Facility and we utilized the remaining amounts under the
Facility and a portion of our cash reserves to fully repay euro
210,000 and accrued interest due under the euro 300,000 bridge
facility with ABN AMRO. Romania In June we increased our ownership
in Prima TV in Romania to 100%, following the purchase of the
remaining 14% equity stake from our three former Romanian minority
partners for euro 2,200. The acquisition follows our ownership
increase in Prima TV to 86% in March, when we acquired an
additional 48.8% equity interest. We had owned a minority stake in
Prima TV since July 2001 and originally invested in Prima TV in
March 2000. Financial Statements We prepare our financial
statements in euro and in accordance with accounting principles
generally accepted in the United States ("U.S. GAAP"). Our
consolidated broadcasting operations generate revenues primarily in
euro, Hungarian forint, Swedish kronor, Norwegian kroner and Danish
kroner and incur substantial operating expenses in these
currencies. We also incur significant operating expenses for
programming in U.S. dollars. Balance sheet accounts are translated
from foreign currencies into euro at the period-end exchange rates
and statement of operations accounts are translated at the weighted
average exchange rates for the period. Any resulting balance sheet
translation adjustments are recorded as accumulated other
comprehensive income (loss) within shareholders' equity. Currency
translation adjustments relating to transactions in currencies
other than the functional currency of the entity involved are
reflected in the results of operations as foreign exchange gain
(loss). In the discussions of the results for the three and six
months ended June 30, 2005 compared to the three and six months
ended June 30, 2004, we divide our operations into four segments:
(1) "Television operations", which include: * SBS6, NET5 and
Veronica (in The Netherlands) and jointly referred to as "our Dutch
Television operations"; * TV2 and, since September 2004, Irisz (in
Hungary) and jointly referred to as "our Hungarian Television
operations"; * Kanal 5 (in Sweden); * VT4 and, since October 2004,
VijfTV (in Flemish Belgium) and jointly referred to as "our Belgian
Television operations"; * TVNorge (in Norway); * TvDanmark and
Kanal 5 (in Denmark) and jointly referred to as "our Danish
Television operations"; * since March 1, 2005, Prima TV (in
Romania); * since August 2004, The Voice TV (in Denmark, Norway,
Sweden and Finland); and * other related operations that are not
material. (2) "Premium pay operation", which includes C More Group
AB in Sweden, Norway, Finland and Denmark. We acquired C More on
March 8, 2005 and, accordingly, the results of operations have been
reflected in our consolidated financial statements since that date.
(3) "Radio operations", which include: * Mix Megapol, The Voice,
Radio City, 106.7 Rockklassiker, Studio 107.5, Vinyl and Lugna
Melodier (in Sweden) and jointly referred to as "our Swedish Radio
operations"; * KISS FM, Radio City, Radio Sata, Radio Mega, Radio
957, Radio Jyvaskyla and Iskelmaradio (in Finland) and jointly
referred to as "our Finnish Radio operations"; * The Voice and
Radio 2 (in Denmark) and jointly referred to as "our Danish Radio
operations"; * Radio 1 and The Voice (in Norway) and jointly
referred to as "our Norwegian Radio operations"; * Since March 1,
2005, KISS FM and Radio STAR (in Romania) and jointly referred to
as "our Romanian Radio operations"; and * Lampsi (in Greece). (4)
"Print operations", which include the Veronica Magazine and the
Satellite Magazine in The Netherlands. Results from Prima TV in
Romania, through February 28, 2005, are not included in the
operations referred to above, but are included in equity in income
(loss) from unconsolidated subsidiaries. From July 2001 until
February 28, 2005, we held a minority interest in the station and
were unable to exercise control over the operations. Since March 1,
2005, we have consolidated Prima TV's operations to reflect our
controlling interest. When analyzing results within the different
categories of operations for any particular period, the sums of the
individual items reported within each category may differ from the
total reported for such category. Differences are primarily
attributable to corporate charges, eliminations between categories
and items attributable to entities that are not separately
disclosed but are included within the totals for the different
categories. The consolidated statements of operations and balance
sheet have been prepared on the basis of a preliminary purchase
price allocation of the acquisitions completed during the first
quarter of 2005. We expect the final purchase price allocation to
be completed during the third quarter. Operating Expenses as a
Percentage of Revenue We monitor our operating expenses as a
percentage of our net revenue as part of our cost management
efforts. We rely on this measurement, in particular, to help plan
and implement the expansion of our existing businesses and the
development of new revenue streams. The following table shows our
operating expenses as a percentage of net revenues for the periods
indicated, as well as a reconciliation of adjusted EBITDA margin to
operating income margin. Three months ended Six months ended June
30, June 30, 2004 2005 2004 2005 Net revenue 100.0% 100.0% 100.0%
100.0% Operating expenses: Station operating expenses 59.0% 58.4%
65.4% 64.0% Selling, general and administrative expenses 16.8%
16.4% 18.3% 18.2% Corporate expenses 1.9% 2.3% 2.1% 2.4% Adjusted
EBITDA margin 22.3% 22.9% 14.2% 15.4% Non-cash compensation 0.1%
0.1% 0.3% 0.1% Depreciation and Amortization 3.6% 4.2% 4.0% 4.3%
Operating income margin 18.6% 18.6% 9.9% 11.0% Three months ended
June 30, 2005 compared to three months ended June 30, 2004 Net
Revenue Net revenue increased euro 56,347, or 30%, from euro
187,207 in the second quarter of 2004 to euro 243,554 in the second
quarter of 2005. Our newly acquired businesses, C More, Prima TV
and the Romanian Radio stations, and the recently launched
television stations, The Voice TV, VijfTV and Irisz, had combined
net revenue of euro 42,455. Excluding our new businesses, our net
revenue increased euro 13,892, or 7%. The net revenue increased
euro 19,020, or 12%, at our Television operations mainly due to
revenue of euro 5,310 at Prima TV and the recently launched
television stations, The Voice TV, VijfTV and Irisz. Excluding such
revenue, our Television operations had increased net revenue of
euro 13,710, or 9%, mainly due to increased net revenue of euro
4,777, or 17%, at our Hungarian Television operations, due to an
increased television advertising market and increased viewing
shares mainly driven by the introduction of a new daily soap on
TV2. Kanal 5 and TVNorge had increased revenue of euro 4,718, or
20%, and euro 2,715, or 19%, respectively, mainly due to increased
viewing shares driven by new programming investments such as the
Royal League (Scandinavian football) and a co-produced version of
Big Brother. Our Dutch Television operations had increased net
revenue of euro 1,365, or 2%, mainly due to an increase in call-TV
revenues, which are generated when viewers pay premium telephone
rates to interact with programs. Our Danish Television operations
had an increase in net revenue of euro 892, or 8%, mainly due to
increased viewing shares at Kanal 5 (Denmark) driven by the
broadcast of the Royal League and other sports programs. Our
Belgian Television operations had increased net revenue of euro
374, or 2%, mainly due to the launch of VijfTV. Our Premium pay
operation, C More, had subscriber fees and other revenue of euro
52,174 in the second quarter of 2005. C More reported net revenue
of euro 35,338, after deducting service fees of euro 16,836 paid to
the cable, satellite and other operators for carriage, marketing
and subscriber handling services. Our Radio operations net revenue
increased euro 1,785, or 11%, mainly due to net revenue of euro
1,807 at the newly acquired Romanian Radio operations. Excluding
such revenue, net revenue decreased euro 22, reflecting decreased
revenues in Denmark, Sweden and Finland and increased net revenue
at our Norwegian Radio operations and Lampsi. Our Print operations
had increased net revenues of euro 204, or 1%, mainly due to
increased subscription income coming from an increase in magazine
prices. Station Operating Expenses Station operating expenses
increased euro 31,877, or 29%, from euro 110,416 in the second
quarter of 2004 to euro 142,293 in the second quarter of 2005. Our
newly acquired businesses, C More, Prima TV and the Romanian Radio
stations, and the recently launched television stations, The Voice
TV, VijfTV and Irisz, had station operating expenses of euro
30,406. Excluding such expenses, our station operating expenses
increased euro 1,471, or 1%. Station operating expenses expressed
as a percentage of net revenues were 59.0% and 58.4% in the second
quarter of 2004 and 2005, respectively. The station operating
expenses increased euro 10,123, or 11%, at our Television
operations, mainly due to programming expenses of euro 7,454 at our
recently launched television stations and Prima TV. Excluding such
expenses, our station operating expenses increased euro 2,669, or
3%, mainly due to our programming investments in Royal League, the
new daily soap at TV2 and a co- produced Big Brother show in Norway
and Sweden. Our Dutch Television operations had decreased station
operating expenses of euro 3,957, or 9%. Our Radio operations had
increased station operating expenses of euro 497, or 7%, mainly due
to station operating expenses of euro 383 at the newly acquired
Romanian Radio operations. Our Print operations had decreased
expenses of euro 1,312, or 14%, mainly due to reduced printing
cost. Selling, General and Administrative Expenses Selling, general
and administrative expenses increased euro 8,543, or 27%, from euro
31,428 in the second quarter of 2004 to euro 39,971 in the second
quarter of 2005. Our newly acquired businesses, C More, Prima TV
and the Romanian Radio stations, and the recently launched
television stations, The Voice TV, VijfTV and Irisz, had selling,
general and administrative expenses of euro 7,621. Excluding such
expenses, our selling, general and administrative expenses
increased euro 922, or 3%. Selling, general and administrative
expenses expressed as a percentage of net revenues were 16.8% and
16.4% in the second quarter of 2004 and 2005, respectively. Our
Television operations had increased selling, general and
administrative expenses of euro 3,086, or 15%, mainly due to
selling, general and administrative expenses of euro 1,404 at our
recently launched television stations and Prima TV. Excluding such
expenses, our selling, general and administrative expenses
increased euro 1,682, or 8%, mainly due to increased marketing
expenses at Kanal 5, TVNorge and TV2 related to the promotion of
new programming initiatives. Our Radio operations had decreased
selling, general and administrative expenses of euro 1,075, or 12%,
mainly due to decreased third-party marketing expenses at our
Swedish, Danish and Norwegian Radio operations. Our Print
operations had increased selling, general and administrative
expenses of euro 895, or 31%, mainly due to increased promotion
activities to increase the number of subscribers. Corporate
Expenses Corporate expenses increased euro 2,154 from euro 3,466 in
the second quarter of 2004 to euro 5,620 in the second quarter of
2005, mainly due to an increase in headcount and staff cost
following the acquisition of C More, and due to expenses related to
Sarbanes-Oxley compliance work. Corporate expenses expressed as a
percentage of net revenues were 1.9% and 2.3% in the second quarter
of 2004 and 2005, respectively. Non-cash Compensation Non-cash
compensation increased euro 34 from euro 220 in the second quarter
of 2004 to euro 254 in the second quarter of 2005, mainly related
to the impact of our increasing share price on options to purchase
66,667 shares of common stock previously granted to our Chairman.
These options are subject to variable accounting treatment, unlike
the rest of our share incentives. Non-cash compensation expressed
as a percentage of net revenues was 0.1% in both quarters.
Depreciation and Amortization Expenses Depreciation and
amortization expenses increased euro 3,568, or 53%, from euro 6,778
in the second quarter of 2004 to euro 10,346 in the second quarter
of 2005, mainly due to increased amortization expenses associated
with intangible assets recorded on the acquisitions of C More,
Prima TV and the Romanian Radio operations. Amortization also
increased due to amortization of intangible assets recorded on the
acquisition of 49% of TVNorge in July 2004. Depreciation and
amortization expenses expressed as a percentage of net revenues
were 3.6% and 4.2% in the second quarter of 2004 and 2005,
respectively. Operating Income Operating income increased euro
10,171, or 29%, from euro 34,899 in the second quarter of 2004 to
euro 45,070 in the second quarter of 2005. Despite operating losses
of euro 3,929 at newly acquired Prima TV and our recently launched
television stations, The Voice TV, VijfTV and Irisz, our Television
operations improved operating income by euro 5,296 from euro 35,842
in the second quarter of 2004 to euro 41,138 in the second quarter
of 2005. The increase was mainly due to increased operating income
of euro 3,994 at our Dutch Television operations, mainly due to
cost savings, and increased operating income of euro 2,732 at our
Hungarian Television operations driven by growth in the Hungarian
television advertising market. Our Premium pay operation, C More,
which was consolidated from March 8, 2005, had operating income of
euro 4,779. Our Radio operations improved operating income by euro
1,592, from a loss of euro 493 in the second quarter of 2004 to an
income of euro 1,099 in the second quarter of 2005, mainly due to
reduced losses of euro 1,093 at our Norwegian Radio operations. Our
Print operations increased income by euro 692 from euro 3,236 in
the second quarter of 2004 to euro 3,928 in the second quarter of
2005. Equity in Loss from Unconsolidated Subsidiaries Equity in
loss from unconsolidated subsidiaries decreased euro 658, from euro
721 in the second quarter of 2004 to euro 63 in the second quarter
of 2005. The majority of the loss in 2004 related to our investment
in Prima TV, which has been consolidated since March 1, 2005. Net
Interest Expense Net interest expense decreased euro 1,232, or 23%,
from euro 5,258 in the second quarter of 2004 to euro 4,026 in the
second quarter of 2005. The decrease was mainly due to the absence
in the second quarter of 2005 of a euro 1,179 non-cash loss in the
second quarter of 2004 on an interest rate swap related to our 12%
Senior Notes. The decrease was also due to the lower interest rate
(currently 2.865%) payable on the Facility compared to the interest
paid on the 12% Senior Notes. Foreign Exchange Gain (Loss) Foreign
exchange loss increased euro 8,142, from euro 49 in the second
quarter of 2004 to euro 8,191 in the second quarter of 2005. The
foreign exchange loss in 2005 mainly comprises a euro 7,447
non-cash loss on amounts drawn on our Facility by our Swedish
holding company to fund the acquisition of C More. The Swedish
holding company was used as the vehicle for the acquisition of C
More and is the current debtor of amounts drawn on the euro 325,000
Facility. Investment Gain In the second quarter of 2005 we
recognized the deferred gain of euro 2,902 recorded in 2002 on the
sale of our equity interest in Publimusic (Radio Noordzee) to Talpa
Management B.V. (Talpa). Talpa sold the company in May 2005,
causing the contingencies related to our sale, which allowed Talpa
to recover certain cash amounts depending on the grant of certain
broadcasting licenses, to lapse. In the second quarter of 2004 we
recorded investment gains of euro 2,789 mainly reflecting an
increase in the fair value of 1.7 million warrants that were
exercisable into common shares of Lions Gate Entertainment Corp.
until December 31, 2004 at an exercise price of $5 per share. Loss
on Extinguishment of Debt Loss on extinguishment of debt increased
euro 6,009 from euro 2,463 in the second quarter of 2004 to euro
8,472 in the second quarter of 2005. In the second quarter of 2004,
we redeemed euro 14,500 principal amount of our 12% Senior Notes.
In the second quarter of 2005, we defeased the remaining
outstanding Senior Notes and subsequently redeemed them on June 15,
2005. Other Expenses, Net Other expenses, net, increased euro 186,
from euro 825 in the second quarter of 2004 to euro 1,011 in the
second quarter of 2005, mainly due to an increase of Hungarian
municipality taxes, which are payable as a percentage of revenues,
and written-off project costs. Income Taxes Income taxes increased
euro 970 from euro 6,782 in the second quarter of 2004 to euro
7.752 in the second quarter of 2005, mainly due to increased tax
charges at our Dutch operations reflecting the increased profit
compared to last year. Net Income Our net income decreased euro
3,743, from euro 18,130 in the second quarter of 2004 to euro
14,387 in the second quarter of 2005, mainly due to the
non-recurring loss on the extinguishment of our 12% Senior Notes.
If the loss on extinguishment had not occurred in either 2004 or
2005, our net income would have increased by euro 2,266, or 11%.
Six months ended June 30, 2005 compared to six months ended June
30, 2004 Net Revenue Net revenue increased euro 86,473, or 26%,
from euro 327,881 in the first half of 2004 to euro 414,354 in the
first half of 2005. Our newly acquired businesses, C More, Prima TV
and the Romanian Radio stations, and the recently launched
television stations, The Voice TV, VijfTV and Irisz, had combined
net revenue of euro 54,448. Excluding our new businesses, our net
revenue increased euro 32,025, or 10%. The net revenue increased
euro 37,877, or 14%, at our Television operations mainly due to
revenue of euro 7,850 at Prima TV and the recently launched
television stations, The Voice TV, VijfTV and Irisz. Excluding such
revenue, our Television operations had increased net revenue of
euro 30,027, or 11%, mainly due to increased net revenue of euro
8,474, or 19%, at our Hungarian Television operations, due to an
increased television advertising market and increased viewing
shares mainly driven by the introduction of a new daily soap on
TV2. Kanal 5 and TVNorge had increased revenue of euro 8,139, or
19%, and euro 6,145, or 24%, respectively, mainly due to increased
viewing shares driven by new programming investments such as the
Royal League (Scandinavian football) and a co-produced version of
Big Brother. Our Dutch Television operations had increased net
revenue of euro 3,543, or 5%, mainly due to an increase in the
television advertising market in the first quarter of 2005. Our
Danish Television operations had an increase in net revenue of euro
2,570, or 12%, mainly due to increased viewing shares at Kanal 5
(Denmark) driven by the broadcast of the Royal League and other
sports programs. Our Belgian Television operations had increased
net revenue of euro 1,881, or 6%, mainly due to the launch of
VijfTV. Our Premium pay operation, C More, had subscriber fees and
other revenue of euro 65,345 in the period March 8 to June 30,
2005. C More reported net revenue of euro 44,242, after deducting
service fees of euro 21,103 paid to the cable, satellite and other
operators for carriage, marketing and subscriber handling services.
Our Radio operations net revenue increased euro 3,004, or 11%,
mainly due to net revenue of euro 2,356 at the newly acquired
Romanian Radio operations, which we have consolidated from March 1,
2005. Excluding such revenue, net revenue increased euro 648, or
3%, mainly due to increased net revenue at our Norwegian Radio
operations arising from sales agreements with other radio stations.
Our Print operations had increased net revenues of euro 1,350, or
4%, mainly due to increased subscription income coming from an
increase in magazine prices. Station Operating Expenses Station
operating expenses increased euro 50,534, or 24%, from euro 214,551
in the first half of 2004 to euro 265,085 in the first half of
2005. Our newly acquired businesses, C More, Prima TV and the
Romanian Radio stations, and the recently launched television
stations, The Voice TV, VijfTV and Irisz, had station operating
expenses of euro 42,203. Excluding such expenses, our station
operating expenses increased euro 8,331, or 4%. Station operating
expenses expressed as a percentage of net revenues were 65.4% and
64.0% in the first half of 2004 and 2005, respectively. The station
operating expenses increased euro 22,721, or 12%, at our Television
operations, mainly due to programming expenses of euro 12,307 at
our recently launched television stations and Prima TV. Excluding
such expenses, our station operating expenses increased euro
10,414, or 6%, mainly due to our programming investments in Royal
League, the new daily soap at TV2 and a co-produced Big Brother
show in Norway and Sweden. Our Dutch Television operations had
decreased station operating expenses of euro 4,828, or 6%. Our
Radio operations had increased station operating expenses of euro
198, or 1%, mainly due to station operating expenses at the newly
acquired Romanian Radio operations. Our Print operations had
decreased expenses of euro 1,764, or 10%, mainly due to reduced
printing cost. Selling, General and Administrative Expenses
Selling, general and administrative expenses increased euro 15,596,
or 26%, from euro 59,917 in the first half of 2004 to euro 75,513
in the first half of 2005. Our newly acquired businesses, C More,
Prima TV and the Romanian Radio stations, and the recently launched
television stations, The Voice TV, VijfTV and Irisz, had selling,
general and administrative expenses of euro 9,878. Excluding such
expenses, our selling, general and administrative operating
expenses increased euro 5,718, or 10%. Selling, general and
administrative expenses expressed as a percentage of net revenues
were 18.3% and 18.2% in the first half of 2004 and 2005,
respectively. Our Television operations had increased selling,
general and administrative expenses of euro 7,467, or 19%, mainly
due to selling, general and administrative expenses of euro 1,998
at our recently launched television stations and Prima TV.
Excluding such expenses, our selling, general and administrative
expenses increased euro 5,469, or 14%, mainly due to increased
marketing expenses at Kanal 5, TVNorge and TV2 related to the
promotion of new programming initiatives. Our Radio operations had
decreased selling, general and administrative expenses of euro
1,015, or 7%, mainly due to decreased third-party marketing
expenses at our Swedish, Danish and Norwegian Radio operations.
Such savings were partly offset by expenses of euro 737 at the
newly acquired Romanian Radio operations. Our Print operations had
increased selling, general and administrative expenses of euro
2,001, or 39%, mainly due to increased promotion activities to
increase the number of subscribers. Corporate Expenses Corporate
expenses increased euro 3,039 from euro 6,903 in the first half of
2004 to euro 9,942 in the first half of 2005, mainly due to an
increase in headcount and staff cost following the acquisition of C
More, and due to expenses related to Sarbanes-Oxley compliance
work. Corporate expenses expressed as a percentage of net revenues
were 2.1% and 2.4% in the first half of 2004 and 2005,
respectively. Non-cash Compensation Non-cash compensation decreased
euro 415 from euro 1,014 in the first half of 2004 to euro 599 in
the first half of 2005. Non-cash compensation mainly relates to the
impact of our increasing share price on options to purchase 66,667
shares of common stock previously granted to our Chairman. These
options are subject to variable accounting treatment, unlike the
rest of our share incentives. Non-cash compensation expressed as a
percentage of net revenues was 0.3% and 0.1% in the first half of
2004 and 2005, respectively. Depreciation and Amortization Expenses
Depreciation and amortization expenses increased euro 4,838, or
37%, from euro 13,119 in the first half of 2004 to euro 17,957 in
the first half of 2005, mainly due to increased amortization
expenses associated with intangible assets recorded on the
acquisitions of C More, Prima TV and the Romanian Radio operations.
Amortization also increased due to amortization of intangible
assets recorded on the acquisition of 49% of TVNorge in July 2004.
Depreciation and amortization expenses expressed as a percentage of
net revenues were 4.0% and 4.3% in the first half of 2004 and 2005,
respectively. Operating Income Operating income increased euro
12,881 from euro 32,377 in the first half of 2004 to euro 45,258 in
the first half of 2005. Despite operating losses of euro 6,385 at
our recently launched television stations, The Voice TV, VijfTV and
Irisz, our Television operations improved operating income by euro
6,263 from euro 38,206 in the first half of 2004 to euro 44,469 in
the first half of 2005. The increase was mainly due to increased
operating income of euro 6,347 at our Dutch Television operations,
mainly due to cost savings. Our Premium pay operation, C More,
which was consolidated from March 8, 2005, had operating income of
euro 5,273. Our Radio operations reduced operating losses by euro
2,748 from euro 3,716 in the first half of 2004 to euro 968 in the
first half of 2005, mainly due to reduced losses of euro 1,530 at
our Norwegian Radio operations. Our Print operations increased
income by euro 1,221, from euro 5,804 in the first half of 2004 to
euro 7,025 in the first half of 2005. Equity in Loss from
Unconsolidated Subsidiaries Equity in loss from unconsolidated
subsidiaries decreased euro 637, from euro 1,297 in the first half
of 2004 to euro 660 in the first half of 2005. The majority of
these losses relates to our investment in Prima TV, which has been
consolidated since March 1, 2005. Net Interest Expense Net interest
expense increased euro 32, from euro 7,155 in the first half of
2004 to euro 7,187 in the first half of 2005. Foreign Exchange Gain
(Loss) Foreign exchange gain (loss) had a negative impact of euro
8,603, from a gain of euro 726 in the first half of 2004 to a loss
of euro 7,877 in the first half of 2005. The foreign exchange loss
in the first half of 2005 mainly comprises a euro 7,447 non-cash
loss on amounts drawn on our Facility by our Swedish holding
company to fund the acquisition of C More. The Swedish holding
company was used as the vehicle for the acquisition of C More and
is the current debtor of amounts drawn on the Facility. Investment
Gain Investment gains in the first half of 2005, of euro 2,963,
mainly comprise the recognition of a deferred gain of euro 2,902
recorded in 2002 on the sale of our equity interest in Publimusic
(Radio Noordzee) to Talpa Management B.V. (Talpa). Talpa sold the
company in May 2005 causing the contingencies related to our sale,
which allowed Talpa to recover certain cash amounts depending on
the grant of certain broadcasting licenses, to lapse. In the first
half of 2004 we recorded investment gains of euro 2,789 mainly
reflecting an increase in the fair value of 1.7 million warrants
that were exercisable into common shares of Lions Gate
Entertainment Corp. until December 31, 2004 at an exercise price of
$5 per share. Loss on Extinguishment of Debt Loss on extinguishment
of debt increased euro 6,009 from euro 2,463 in the first half of
2004 to euro 8,472 in the first half of 2005. In the first half of
2004, we redeemed euro 14,500 principal amount of our 12% Senior
Notes. In the first half of 2005, we defeased the remaining
outstanding Senior Notes and subsequently redeemed them on June 15,
2005. Other Expenses, Net Other expenses, net, increased euro 790,
from euro 1,372 in the first half of 2004 to euro 2,162 in the
first half of 2005, mainly due to an increase of Hungarian
municipality taxes, which are payable as a percentage of revenues,
and written-off project costs in the first half of 2005. Income
Taxes Income taxes decreased euro 436 from euro 7,033 in the first
half of 2004 to euro 6,597 in the first half of 2005, mainly due to
tax savings at Kanal 5 in Sweden related to the foreign exchange
loss and interest on amounts drawn on our Facility. Net Income As a
result of the foregoing, our net income decreased euro 2,928, from
euro 14,224 in the first half of 2004 to euro 11,296 in the first
half of 2005, mainly due to the non-recurring loss on the
extinguishment of our 12% Senior Notes. If the loss on
extinguishment had not occurred in either 2004 or 2005, our net
income would have increased by euro 3,081, or 18%. Adjusted EBITDA
We use the key indicator of operating income before depreciation,
amortization and non-cash compensation ("adjusted EBITDA"), along
with adjusted EBITDA margin, primarily to evaluate the group's and
our individual subsidiaries' operating performance, and for
planning and forecasting future business operations. These key
indicators provide investors the opportunity to evaluate the
group's performance as it is viewed by management. Although other
companies in the broadcast industry may present other financial
measures, or calculate these measures differently than we do, we
believe that adjusted EBITDA and adjusted EBITDA margin may provide
some comparability in analyzing the operating performance of
companies in our industry. Adjusted EBITDA and adjusted EBITDA
margin exclude depreciation and amortization expenses in order to
eliminate the impact of generally long-term capital investments
that cannot be significantly influenced by our management on a
short-term basis. The measures also exclude non-cash compensation
because it does not reflect the operating results that we achieve
from servicing our customers. There are material limitations to
using measures such as adjusted EBITDA and adjusted EBITDA margin,
including the aforementioned difficulties associated with comparing
these performance measures as we calculate them to similar
performance measures presented by other companies, and the fact
that these performance measures do not take into account
significant items, such as depreciation and amortization. Adjusted
EBITDA should be considered in addition to, but not as a substitute
for, other measures of financial performance reported in accordance
with U.S. GAAP, such as operating income and net income. Management
believes that when used in this fashion adjusted EBITDA and
adjusted EBITDA margin can be useful tools despite their
limitations. We provide below, on a consolidated basis, a
reconciliation of the non-GAAP measure adjusted EBITDA to operating
income (loss), which is the most directly comparable U.S. GAAP
financial measure, for the three and six months ended June 30, 2004
and 2005. Three months ended Six months ended June 30, June 30,
2004 2005 2004 2005 Operating income euro 34,899 euro 45,070 euro
32,377 euro 45,258 Add: Non-cash compensation 220 254 1,014 599
Depreciation 3,250 3,548 6,383 7,114 Amortization 3,528 6,798 6,736
10,843 Adjusted EBITDA euro 41,897 euro 55,670 euro 46,510 euro
63,814 Adjusted EBITDA increased euro 13,773, or 33%, for the three
months ended June 30, 2005 compared to the three months ended June
30, 2004, and euro 17,304, or 37%, for the six months ended June
30, 2005 compared to the six months ended June 30, 2004. The
following table shows the changes in the adjusted EBITDA by
segment: Three months ended Six months ended June 30, June 30, 2004
2005 2004 2005 Television operations euro 39,936 euro 45,747 euro
46,174 euro 53,863 Premium pay operations - 7,132 - 7,720 Radio
operations 1,131 3,494 (653) 3,168 Print operations 4,296 4,917
7,892 9,005 Cash corporate expenses (3,466) (5,620) (6,903) (9,942)
Adjusted EBITDA euro 41,897 euro 55,670 euro 46,510 euro 63,814 In
the three months ended June 30, 2005, adjusted EBITDA increased
euro 5,811, or 15%, at our Television operations, mainly due to
improved results from our Dutch and Hungarian Television
operations. Such improvements were partly offset by losses of euro
3,237 at our recently launched television stations, The Voice TV,
VijfTV and Irisz. In the six months ended June 30, 2005, adjusted
EBITDA increased euro 7,689, or 17%, despite losses of euro 6,015
at our recently launched television stations. Our Premium pay
operation, C More, which was consolidated from March 8, 2005,
generated adjusted EBITDA of euro 7,132 and euro 7,720 in the three
and six months ended June 30, 2005, respectively. Our Radio
operations improved adjusted EBITDA by euro 2,363 and euro 3,821 in
the three and six months ended June 30, 2005, respectively. The
improvement was mainly due to reduced losses in our Norwegian Radio
operations, and adjusted EBITDA of euro 844 and euro 1,102,
respectively, in our newly acquired Romanian Radio operations. Our
Print operations improved adjusted EBITDA by euro 621 and euro
1,113 in the three and six months ended June 30, 2005,
respectively. Cash Flow Cash provided by operations increased euro
45,325 from euro 4,353 in the first half of 2004 to euro 49,678 in
the first half of 2005. The increase was primarily due to timing
differences related to programming payments and the improved
operating performance of the Company. Cash used in investing
activities increased euro 294,843 from euro 14,580 in the first
half of 2004 to euro 309,423 in the first half of 2005 mainly due
to our investments in C More, Prima TV and the Romanian radio
operations. Cash provided by financing activities was euro 172,985
in the first half of 2005, compared to cash used in financing
activities of euro 16,777 in the first half of 2004. The change
mainly reflects the euro 275,000 drawn on our Facility to fund the
C More acquisition, net of the cash required to defease and redeem
the 12% Senior Notes. The change also reflected the proceeds of
euro 20,313 from 1,119,945 stock options exercised in the first
half of 2005. Forward-Looking Statements Some of the statements in
this press release are forward-looking, including, without
limitation: the statement that we remain focused on implementing
our growth strategy and seek to expand the scope of our business,
thereby further diversifying our revenue streams while creating
additional cash flows; the statement that with a strong balance
sheet, including a new bank facility that significantly lowers our
cost of capital, we believe we are well positioned to grow our core
operations and capitalize on new opportunities to increase
shareholder value; and the statement that we expect the final
purchase price allocation in respect of the acquisitions completed
during the first quarter of 2005 to be completed during the third
quarter. These forward-looking statements include statements
relating to our future performance, competition, trends and
anticipated developments in the television and radio broadcasting,
and publishing industry. In addition, we may make forward-looking
statements in future filings with the Securities and Exchange
Commission, and in written material, press releases and oral
statements issued by us or on our behalf. Forward-looking
statements include statements regarding our intent, belief or
current expectations or those of our officers (including statements
preceded by, followed by or that include forward-looking
terminology such as "may," "will," "should," "believes," "expects,"
"anticipates," "estimates," "continues" or similar expressions or
comparable terminology) with respect to various matters. It is
important to note that our actual results in the future could
differ materially from those anticipated in these forward-looking
statements depending on various important factors. Some of these
factors include: the effects of, and changes in, regulation and
government policy; the effects of changes in general economic
environment; the effects of changes in the advertising and
subscription spending growth; the effects of competition; our
ability to reduce costs; the timely development and acceptance of
our new channels, stations and/or services; the effects of
technological changes in broadcasting technology; and, our success
at managing the risks that arise from these factors. All
forward-looking statements in this press release are based on
information available to us on the date hereof. We do not undertake
to update any forward-looking statements that may be made by us or
on our behalf, in this press release or otherwise. Conference Call
The Company will host a teleconference to discuss its results on
Friday, July 29, 2005 at 10:00 am New York Time, which is 4:00 pm
Luxembourg Time. To access the teleconference, please dial
+1-973-321-1100 ten minutes prior to the start time. The
teleconference will also be available via live web-cast on our
web-site, located at http://www.sbsbroadcasting.com/. If you cannot
listen to the teleconference at its scheduled time, there will be a
replay available through August 5, 2005 that can be accessed by
dialing +1-877-519-4471 (U.S. callers) or +1-973-341-3080
(International callers), passcode 6234742. The web-cast will be
archived on our web-site for two weeks. SBS is a European
commercial television and radio broadcasting company with
operations in Western and Central Europe. Countries where SBS
currently has broadcasting assets include: Belgium (Flanders),
Denmark, Finland, Greece, Hungary, The Netherlands, Norway, Romania
and Sweden. For further information visit:
http://www.sbsbroadcasting.com/, or contact: Investors: Press:
Michael Smargiassi Jeff Pryor Catriona Cockburn Brainerd
Communicators, Inc. Pryor Associates Citigate Dewe Rogerson Tel: +1
212 986 6667 Tel: +1 818 338 3555 Tel: +44 207 282 2924 SBS
BROADCASTING SA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands of euro, except share and per share data) Three
months ended Six months ended June 30, June 30, 2004 2005 2004 2005
Net revenue 187,207 243,554 327,881 414,354 Operating expenses:
Station operating expenses (exclusive of depreciation and
amortization) 110,416 142,293 214,551 265,085 Selling, general and
administrative expenses (exclusive of depreciation and
amortization) 31,428 39,971 59,917 75,513 Corporate expenses 3,466
5,620 6,903 9,942 Non-cash compensation 220 254 1,014 599
Depreciation 3,250 3,548 6,383 7,114 Amortization 3,528 6,798 6,736
10,843 Total operating expenses 152,308 198,484 295,504 369,096
Operating income 34,899 45,070 32,377 45,258 Equity in loss from
unconsolidated subsidiaries (721) (63) (1,297) (660) Interest
income 938 1,077 2,010 2,010 Interest expense (6,196) (5,103)
(9,165) (9,197) Foreign exchange gain (loss) (49) (8,191) 726
(7,877) Investment gain 2,789 2,902 2,789 2,963 Loss on
extinguishments of debt (2,463) (8,472) (2,463) (8,472) Other
expense, net (825) (1,011) (1,372) (2,162) Income before income
taxes and minority interest 28,372 26,209 23,605 21,863 Income
taxes (6,782) (7,752) (7,033) (6,597) Income before minority
interest 21,590 18,457 16,572 15,266 Minority interest in income,
net (3,460) (4,070) (2,348) (3,970) Net income 18,130 14,387 14,224
11,296 Net income per common share - basic: 0.58 0.44 0.46 0.35 Net
income per common share - diluted: 0.55 0.40 0.43 0.32 Weighted
average common shares - basic 31,138 32,649 31,107 32,308 Weighted
average common shares - diluted 33,693 35,883 33,163 35,495 SBS
BROADCASTING SA CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands
of euro) December 31, June 30, ASSETS 2004 2005 Current assets:
Cash and cash equivalents 196,033 103,132 Short-term investments
354 252 Trade accounts receivable, net of allowance for doubtful
accounts of euro 6,006 (euro 4,294 in 2004) 88,398 125,135 Accounts
receivable, affiliates 1,475 1,788 Restricted cash and cash in
escrow 2,451 1,792 Program rights inventory, current 117,544
124,075 Deferred tax assets, current 2,372 9,274 Other current
assets 23,702 32,056 Total current assets 432,329 397,504
Buildings, improvements, technical and other equipment, net of
accumulated depreciation 41,256 43,147 Goodwill and other
intangible assets, net of accumulated amortization 245,274 495,100
Program rights inventory, non-current 62,928 61,808 Deferred
financing cost, net of accumulated amortization 2,600 4,685
Investments in and advances to unconsolidated subsidiaries 5,972
3,564 Other assets 388 9,328 Total assets 790,747 1,015,136 Current
liabilities: Accounts payable 33,698 44,681 Accrued expenses 66,702
78,153 Program rights payable, current 46,674 64,070 Income taxes
payable 3,763 3,956 Current portion of long-term debt 2,550 543
Deferred income, current 40,785 29,540 Deferred taxes, current
9,271 7,043 Other current liabilities 19,780 16,105 Total current
liabilities 223,223 244,091 Program rights payable, non-current
22,651 23,811 euro 325 million revolving multicurrency credit
facility - 275,000 12% senior notes due 2008 103,655 - Other
long-term debt 6,784 867 Deferred tax, non-current 23,109 30,830
Other non-current liabilities 7,588 4,815 Minority interest 58,791
62,868 Shareholders' equity: Common Shares (authorized 75,000,000
issued 32,909,890 (31,780,895 in 2004) at par value euro 2.00)
63,562 65,820 Additional paid-in capital 683,678 702,094
Accumulated deficit (394,965) (383,669) Unearned compensation
(1,376) (1,140) Accumulated other comprehensive loss (5,953)
(10,251) Total shareholders' equity 344,946 372,854 Total
liabilities and shareholders' equity 790,747 1,015,136 SBS
BROADCASTING SA CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of euro) Six months ended June 30, 2004 2004 Cash
flows from operating activities: Net income 14,224 11,296
Adjustments to reconcile net income to net cash provided by
operating activities: Revenue recorded in exchange for equity
investments (916) (1,241) Non-cash compensation 1,014 599
Depreciation and amortization 13,119 17,957 Equity in loss from
unconsolidated subsidiaries 1,297 660 Non-cash interest expense 540
311 Foreign exchange loss (gain) on long-term debt (108) 9,470
Investment gain (2,789) (2,963) Loss on extinguishments of debt
2,463 8,472 Deferred tax expense 4,611 5,386 Minority interest in
income 2,348 3,970 Changes in operating assets and liabilities, net
of amounts acquired: Accounts receivable 5,527 (18,947) Accounts
receivable, affiliates (286) (80) Program rights inventory, net
(16,197) 34,441 Other current assets (192) (1,134) Other
non-current assets (678) (41) Accounts payable and accrued expenses
(16,289) (5,122) Deferred income (1,737) (12,695) Other liabilities
1,598 (661) Cash provided by operating activities 4,353 49,678 Cash
flows from investing activities: Proceeds from sale of short-term
investments - 163 Cash capital expenditure (13,846) (15,289)
Payment for purchase of acquired business, net of cash acquired
(734) (294,297) Cash used in investing activities (14,580)
(309,423) Cash flows from financing activities: Proceeds from
issuance of common shares 1,889 20,313 Proceeds from incurrence of
debt - 270,187 Net change in restricted cash and cash in escrow
(242) 914 Payment of long-term debt (18,424) (118,429) Cash
provided by (used in) financing activities (16,777) 172,985 Effect
of exchange rate changes on cash and cash equivalents (281) (6,141)
Net change in cash and cash equivalents (27,285) (92,901) Cash and
cash equivalents, beginning of period 245,836 196,033 Cash and cash
equivalents, end of period 218,551 103,132 SBS BROADCASTING SA
OPERATING RESULTS BY SEGMENT (UNAUDITED) (in thousands of euro)
Three months ended Six months ended June 30, June 30, Television
2004 2005 2004 2005 Net revenue: SBS6, NET5 and Veronica (in the
Netherlands) 57,681 59,046 99,594 103,137 TV2 & Irisz (in
Hungary) 28,700 33,477 45,259 53,733 Kanal 5 (in Sweden) 23,236
27,954 43,384 51,523 VT4 & VijfTV (in Belgium) 17,443 17,817
31,433 33,314 TV Norge (in Norway) 14,141 16,856 25,397 31,542 TV
Danmark and Kanal 5 (in Denmark) 11,519 12,411 21,240 23,810 Prima
TV (in Romania) - 3,205 - 4,160 The Voice TV - 678 - 1,468 Other
1,677 1,973 2,442 3,939 Total net revenue 154,397 173,417 268,749
306,626 Station operating expenses 94,512 104,635 183,291 206,012
Selling, general and administrative expenses 19,949 23,035 39,284
46,751 Total operating expenses 114,461 127,670 222,575 252,763
Adjusted EBITDA 39,936 45,747 46,174 53,863 Premium pay Subscriber
fees and other revenue - 52,174 - 65,345 Operator service fees -
(16,836) - (21,103) Net revenue - 35,338 - 44,242 Station operating
expenses - 22,569 - 29,379 Selling, general and administrative
expenses - 5,637 - 7,143 Total operating expenses - 28,206 - 36,522
Adjusted EBITDA - 7,132 - 7,720 Radio Net revenue: Sweden 5,010
4,872 8,269 8,115 Finland 4,461 4,350 7,386 7,443 Denmark 3,046
2,377 5,704 5,101 Norway 2,666 3,237 4,472 5,569 Romania - 1,807 -
2,356 Greece 1,326 1,651 2,359 2,610 Total net revenue 16,509
18,294 28,190 31,194 Station operating expenses 6,745 7,242 13,372
13,570 Selling, general and administrative expenses 8,633 7,558
15,471 14,456 Total operating expenses 15,378 14,800 28,843 28,026
Adjusted EBITDA 1,131 3,494 (653) 3,168 Print Net revenue 16,301
16,505 30,942 32,292 Station operating expenses 9,159 7,847 17,888
16,124 Selling, general and administrative expenses 2,846 3,741
5,162 7,163 Total operating expenses 12,005 11,588 23,050 23,287
Adjusted EBITDA 4,296 4,917 7,892 9,005 Consolidated Net revenue:
187,207 243,554 327,881 414,354 Adjusted EBITDA from operating
segments 45,363 61,290 53,413 73,756 Corporate expenses (3,466)
(5,620) (6,903) (9,942) Non-cash compensation (220) (254) (1,014)
(599) Depreciation and amortization - Television (4,094) (4,609)
(7,968) (9,394) Depreciation and amortization - Premium Pay -
(2,353) - (2,447) Depreciation and amortization - Radio (1,624)
(2,395) (3,063) (4,136) Depreciation and amortization - Print
(1,060) (989) (2,088) (1,980) Operating income 34,899 45,070 32,377
45,258 DATASOURCE: SBS Broadcasting SA CONTACT: Investors: Michael
Smargiassi of Brainerd Communicators, Inc., +1-212-986-6667; or
Press: Jeff Pryor of Pryor Associates, +1-818-338-3555; or Catriona
Cockburn of Citigate Dewe Rogerson, +44-207-282-2924 Web site:
http://www.sbsbroadcasting.com/
Copyright