XSON Claxson Interactive (MM)

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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