TV Azteca Reports 51% EBITDA Margin in 4Q03; 46% for the Full Year
- Net Sales Increase 12% in 4Q03 and 5% in Year, to All-Time
Records - MEXICO CITY, Feb. 24 /PRNewswire-FirstCall/ -- TV Azteca,
S.A. de C.V. (NYSE: TZA; BMV: TVAZTCA), one of the two largest
producers of Spanish language television programming in the world,
announced today all-time high fourth quarter net sales of Ps.2,296
million (US$204 million), up 12% from the same period of 2002.
Fourth quarter EBITDA was Ps.1,163 million (US$104 million), 7%
below the same quarter a year ago. On a proforma basis, excluding a
non-recurring cancellation of amortization of exhibition rights for
Ps.97 million (US$9 million) in the fourth quarter of the prior
year, EBITDA was up 1%. EBITDA margin for the quarter was 51%. Net
sales for the full year rose 5% to an all-time record level of
Ps.7,281 million (US$648 million). Full year EBITDA increased 1% to
Ps.3,376 million (US$301 million), the highest level in six years.
EBITDA margin for2003 was 46%. "Solid operating results together
with the implementation of the company's six year plan for uses of
cash further strengthened our financial position during the
quarter," said Pedro Padilla, Chief Executive Officer of TV Azteca.
"We are fully committed to continue with our cash plan, with the
consequential benefit for all of our stakeholders." The company
noted the cash usage plan entails reducing TV Azteca's debt by
approximately US$250 million, and making cash distributions to
shareholders above US$500 million by 2008. Fourth Quarter Results
Net sales grew 12% to an all-time high level of Ps.2,296 million
(US$204 million), up from Ps.2,054 million (US$183 million) for the
same quarter of 2002. Total costs and expenses rose 42% to Ps.1,133
million (US$101 million), from Ps.800 million (US$71 million) for
the same period of last year. As a result, the company reported
EBITDA of Ps.1,163 million (US$104 million), 7% lower than Ps.1,254
million (US$112 million) in the fourth quarter of 2002. Net income
for the quarter was Ps.595 million (US$53 million) compared with
net income of Ps.745 million (US$66 million) for the same period of
2002. Millions of pesos(1) and dollars(2) except percentages and
per share amounts. 4Q 2002 4Q 2003 Change US$ % Net Sales Pesos Ps.
2,054 Ps. 2,296 US$ US$ 183 US$ 204 22 +12% EBITDA(3) Pesos Ps.
1,254 Ps. 1,163 US$ US$ 112 US$ 104 (8) -7% Net Income Pesos Ps.
745 Ps. 595 US$ US$ 66 US$ 53 (13) -20% Income per ADS(4) Pesos Ps.
3.90 Ps. 3.12 US$ US$ 0.35 US$ 0.28 (0.07) -20% 1 Pesos of constant
purchasing power as of December 31, 2003. 2 Conversion based on the
exchange rate of Ps.11.23 per US dollar as of December 31, 2003. 3
EBITDA is Profit Before Depreciation and Amortization under Mexican
GAAP. 4 Calculated based on 191 million ADSs outstanding as of
December 31, 2003 Net Sales "We experienced acceleration of
domestic demand for advertising since the very beginning of the
quarter, and captured selling opportunities coming from various
economic sectors," said Mario San Roman, Chief Operating Officer of
TV Azteca. "We have witnessed solid commercial performance of many
of our client's brands, consistent with improvements in the Mexican
economy." Fourth quarter net revenue includes sales from Azteca
America Network of Ps.76 million (US$7 million). Revenue is
composed of Ps.43 million (US$4 million) in sales from the Los
Angeles station KAZA-TV, and Ps.33 million (US$3 million) from
network sales. During the quarter, TV Azteca also reported sales of
programming abroad of Ps.23 million (US$2 million), which was 53%
above the Ps.15 million (US$1 million) of the fourth quarter of the
prior year. Growth in programming exports was principally driven by
sales of our novela La Hija del Jardinero in certain markets of
Asia, and our novelas Subete a mi Moto and Dos Chicos de Cuidado in
Latin American countries. During the fourth quarter, TV Azteca
reported content and advertising sales to Todito.com of Ps.54
million (US$5 million), and Ps.35 million (US$3 million) in
advertising sales to Unefon. In the fourth quarter of 2002, sales
to Todito and Unefon were Ps.66 million (US$6 million) and Ps.35
million (US$3 million), respectively. In accordance with the terms
of the advertising contract between Unefon and TV Azteca, during
the fourth quarter Unefon paid to TV Azteca in cash the Ps.29
million (US$3 million) of advertising purchases placed within the
prior three month period. Additionally, Unefon paid Ps.63 million
(US$6 million) in cash, which correspond to the second of four
semi-annual installments of deferred payments for television
advertising made prior to 2003. During the quarter, barter sales
were Ps.101 million (US$9 million), compared with Ps.45 million
(US$4 million) in the same period of the prior year. Inflation
adjustment of advertising advances was Ps.45 million (US$4
million), compared with Ps.66 million (US$6 million) of the fourth
quarter of 2002. Costs and Expenses The 42% increase in fourth
quarter costs and expenses resulted from the combined effect of a
64% increase in programming, production and transmission costs to
Ps.859million (US$76 million), from Ps.524 million (US$47 million)
in the prior year period, and a 1% reduction in administration and
selling expense to Ps.274 million (US$24 million), from Ps.276
million (US$25 million) in the same quarter a year ago. On
aproforma basis, excluding a non-recurring cancellation of
amortization of exhibition rights for Ps.97 million (US$9 million)
in the fourth quarter of the prior year, total costs and expenses
grew 26%. "In addition to the cancellation of amortization, we had
a tough yardstick for costs with the fourth quarter of 2002," added
Mr. San Roman. "A year ago we substituted a prime-time novela with
La Academia, our musical reality show, after the costs of its
rehearsal and production facilities had already been amortized in
the prior quarter, resulting in overall reduced costs." The company
noted the programming grid of its flagship channel in the fourth
quarter of 2003 contained a standard weekday primetime lineup that
included three novelas. TV Azteca's programming also incorporated
the company's reality show Escuela de Estrellas. In contrast, in
the fourth quarter a year ago, TV Azteca aired only two primetime
novelas, and La Academia, with its associated facilities fully
amortized in the third quarter of 2002. The company also noted that
the operations of the Los Angeles station and the growing business
of Azteca America Network generated production costs during the
quarter, which were not present in the same period of 2002. EBITDA
and Net Income The 12% increase in fourth quarter net sales,
combined with the 42% growth in costs and expenses, resulted in
EBITDA of Ps.1,163 million (US$104 million), down 7% from Ps.1,254
million (US$112 million) a year ago. On a proforma basis, excluding
the non-recurring cancellation of amortization of exhibition rights
for Ps.97 million (US$9 million) in the fourth quarter of the prior
year, EBITDA was up 1%. Below EBITDA, fourth quarter results were
negatively impacted by an increase in depreciation and amortization
to Ps.111 million (US$10 million), from a positive figure of Ps.5
million (US$0 million) a year ago. The change is primarily
explained by a positive figure for amortization of Ps.86 million
(US$8 million) in the fourth quarter of the prior year, resulting
from a reversal in accumulated amortization of the first nine
months of 2002, reflecting changes in the valuation of television
concession in accordance with Mexican GAAP bulleting C-8, as was
previously detailed. During the quarter, the company also recorded
other expense of Ps.168 million (US$15 million), compared with
Ps.178 million (US$16 million) a year ago. Other expense for the
quarter was primarily composed of Ps.69 million (US$6 million) of
amortization of installation charges, Ps.27 million (US$2 million)
from the recognition of 50% of the net loss of Todito.com in TV
Azteca's financial statements, Ps.26 million (US$2 million) of
advisory fees, Ps.26 million (US$2 million) from amortizations of
brands and patents, and Ps.19 million (US$2 million) of charitable
donations. Fourth quarter net comprehensive financing cost
increased to Ps.238 million (US$21 million), from Ps.192 million
(US$17 million) for the same period of 2002. The increase mainly
results from the combined effect of a Ps.55 million (US$5 million)
exchange loss during the quarter compared with an exchange gain of
Ps.25 million (US$2 million) a year ago, and of a Ps.27 million
(US$2 million) reduction in monetary loss. The exchange loss
reflects anet dollar liability position of the company, whereas the
exchange gain results from increases in accounts receivable from
Pappas Telecasting in the prior year. The reduction in monetary
loss is explained by a decrease in TV Azteca's net asset monetary
position. Fourth quarter net income was Ps.595 million (US$53
million), compared with net income of Ps.745 million (US$66
million) for the same period of 2002. Advertising Advances The
balance of advertising advances as of December 31, 2003, excluding
advance sales to Unefon and Todito, rose 6% to Ps.4,903 (US$437
million), compared with Ps.4,623 million (US$412 million) in the
prior year. The company considers the advertising advances level to
be a vote of confidence from advertisers in regard to the ability
of TV Azteca's proven content to reach target audiences. Generation
and Uses of Cash The company noted its sound financial results in
2003 translated into free-cash generation for the year-before debt
payment and distributions to shareholders-of Ps.1,458 million
(US$130 million), which surpassed its target of US$125 million for
2003. Adhering to the timetable of the company's plan for uses of
cash, TV Azteca made cash distributions of US$140 million during
2003, and on February 2004 used US$60 million of its cash position
to amortize its US$125 million 101/8% note due February 15, 2004.
Growth in Azteca America Azteca America Network increased its
over-the-air coverage to 73% of the U.S. Hispanic households from
67% at the close of the prior quarter, with no associated equity
investment from TV Azteca. With this quarter's affiliations in
Dallas and Corpus Christi, TX; Denver, CO and
Yakima-Pascoe-Richland, WA, Azteca America Network has coverage in
33 markets, and reaches 13 of the top 15 Hispanic market areas.
Cable carriage is present in twelve markets, which are equivalent
to 30% of U.S. Hispanic households. During the quarter, some of
Azteca America Network's affiliates reached agreements with DirecTV
to have their signal carried on DirecTV's system. On January 7,
2004, the DirecTV system started to transmit the signal of the
network's affiliate stations of New York, Miami and Las Vegas.
Unefon Split off On December 19, 2003, TV Azteca shareholders
approved a split off of the company's 46.5% equity stake in Unefon
(BMV: UNEFON) and of its 50% equity stake in Cosmofrecuencias, a
wireless broadband Internet access provider. The telecommunications
assets formed Unefon Holdings, which on December 22 became a legal
Mexican entity (Sociedad Anonima) independent from TV Azteca. From
the perspective of TV Azteca's balance sheet, the split off
entailed a reduction of TV Azteca's assets and stockholders' equity
equal to the book value of TV Azteca's investment in Unefon and
Cosmofrecuencias, which totaled Ps.629 million (US$56 million) as
of December 31, 2003. The split off of the telecom investments did
not have an impact on TV Azteca's income statement. Payment of
US$125 Million 101/8% Note due 2004 On February9, 2004, TV Azteca
fully amortized its US$125 million 101/8% note due February 15,
2004. As previously detailed, the payment was composed of US$60
million from TV Azteca's cash position and US$65 million of
unsecured financing obtained from financial institutions, on market
terms. On a proforma basis, including the US$125 million
amortization, TV Azteca's total debt as of December 31, 2003 was
US$544 million, which results into a total debt to EBITDA ratio of
1.8 times. Sale of Station in El Salvador During the fourth
quarter, TV Azteca sold its majority equity stake in Channel 12 of
El Salvador for US$6 million. "We focus on developing highly
profitable businesses, and the station in El Salvador was at the
lower end of contribution to overallresults," said Carlos Hesles,
Chief Financial Officer of TV Azteca. Additionally, TV Azteca
considers Channel 12's growth prospects were limited by a
relatively small market scale. The company expects Channel 12 to be
a buyer of TV Azteca's programming going forward, given that
viewers in El Salvador have enjoyed Azteca entertainment since the
initial company investment in 1997. Twelve Month Results Net sales
for the full year rose 5% to an all-time high level of Ps.7,281
million (US$648 million), up from Ps.6,956 million (US$619 million)
for 2002. Full year EBITDA increased 1% to a six-year record of
Ps.3,376 million (US$301 million), from Ps.3,332 million (US$297
million) for last year. The EBITDA margin for 2003 was 46%. Net
earnings were Ps.1,576 million (US$140 million), compared with
Ps.1,024 million (US$91 million) in 2002. Millions of pesos(1) and
dollars(2) except percentages and per share amounts. 2002 2003
Change US$ % Net Sales Pesos Ps. 6,956 Ps. 7,281 US$ US$ 619 US$
648 29 +5% EBITDA(3) Pesos Ps. 3,332 Ps. 3,376 US$ US$ 297 US$ 301
4 +1% Net Income Pesos Ps. 1,024 Ps. 1,576 US$ US$ 91 US$ 140 49
54% Income per ADS(4) Pesos Ps. 5.36 Ps. 8.25 US$ US$ 0.48 US$ 0.73
0.25 54% 1 Pesos of constant purchasing power as of December 31,
2003. 2 Conversion based on the exchange rate of Ps.11.23 per US
dollar as of December 31, 2003. 3 EBITDA is Profit Before
Depreciation and Amortization under Mexican GAAP. 4 Calculated
based on 191 million ADSs outstanding as of December 31, 2003
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. TV AZTECA, S.A. DE C.V. AND SUBSIDIARIES CONSOLIDATED
RESULTS OF OPERATIONS* (Millions of Mexican pesos of December 31,
2003 purchasing power) Fourth Quarter of: Fourth Quarter of: 2002
2003 2002 2003 Change Millions of US Dollars ** % Net revenue Ps
2,054 Ps 2,296 US$ 183 100% US$ 204 100% US$ 22 12% Programming,
production and transmission costs 524 859 47 26% 76 37% 30 64%
Sales and administrative expenses 276 274 25 13% 24 12% (0) -1%
EBITDA 1,254 1,163 112 61% 104 51% (8) -7% Depreciation and
amortization (5) 111 (0) 10 10 Operating profit 1,259 1,052 112 61%
94 46% (18) -16% Other expenses - Net (178) (168) (16) (15) 1
Comprehensive financing cost: Interest expense (200) (208) (18)
(19) (1) Other financing expense (16) (10) (1) (1) 1 Interest
income 37 46 3 4 1 Exchange gain (loss) - Net 25 (55) 2 (5) (7)
Loss on monetary position (38) (11) (3) (1) 2 Net comprehensive
financing cost (192)(238) (17) (21) (4) Income before provision for
income tax and deferred income tax 889 646 79 43% 58 28% (22) -27%
Provision for: Income tax (117) 106 (10) 9 20 Deferred income tax
(27) (157) (2) (14) (12) Net income Ps 745 Ps 595 US$ 66 36% US$ 53
26% US$ (13) -20% Net income of minority stockholders Ps 0.1 Ps 0.4
US $0 US$ 0 US$0 Net income of majority stockholders Ps 745 Ps 595
US $66 36% US$ 53 26% US$(13) -20% End of period exchange rate Ps
10.40 Ps 11.23 * Mexican GAAP. ** The U.S. dollar figures represent
the Mexican peso amounts as of December 31, 2003 expressed as of
December 31, 2003 purchasing power, translated at the exchange rate
of Ps. 11.23 per U.S. dollar. TV AZTECA, S.A. DE C.V. AND
SUBSIDIARIES CONSOLIDATED RESULTS OF OPERATIONS* (Millions of
Mexican pesos of December 31, 2003 purchasing power) Year ended
Year ended December 31, December 31, 2002 2003 2002 2003 Change
Millions of US Dollars ** % Net revenue Ps 6,956 Ps 7,281 US$ 619
100% US$ 648 100% US$ 29 5% Programming, production and
transmission costs 2,611 2,854 232 38% 254 39% 22 9% Sales and
administrative expenses 1,013 1,051 90 15% 94 14% 3 4% EBITDA 3,332
3,376 297 48% 301 46% 4 1% Depreciation and amortization 401 369 36
33 (3) Operating profit 2,931 3,007 261 42% 268 41% 7 3% Other
expenses - Net (459) (458) (41) (41) 0 Comprehensive financing
cost: Interest expense (754) (767) (67) (68) (1) Other financing
expense (140) (52) (12) (5) 8 Interest income 200 205 18 18 0
Exchange loss - Net (367) (192) (33) (17) 16 Loss on monetary
position (85) (31) (8) (3) 5 Net comprehensive financing cost
(1,146) (837) (102) (75) 28 Income before provision for income tax
and deferred income tax 1,326 1,712 118 19% 152 24% 34 29%
Provisions for: Income tax (275) (3) (24) (0) 24 Deferred income
tax (27) (132) (2) (12) (9) Net income Ps 1,024 Ps 1,577 US$ 91 15%
US$ 140 22% US$ 49 54% Net (loss) income of minority stockholders
Ps (0.2) Ps 1.4 US$ (0.0) US$ 0.1 US$ 0 Net income of majority
stock- holders Ps 1,024 Ps 1,576 US$ 91 15% US$ 140 22% US$ 49 54%
End of period exchange rate Ps 10.40 Ps 11.23 * Mexican GAAP. **
The U.S. dollar figures represent the Mexican peso amounts as of
December 31, 2003 expressed as of December 31, 2003 purchasing
power, translated at the exchange rate of Ps. 11.23 per U.S.
dollar. TV AZTECA, S.A. DE C.V. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS* (Millions of Mexican pesos of December 31, 2003
purchasing power) At December 31, At December 31, 2002 2003 2002
2003 Change Millions of US Dollars** Current assets: % Cash and
cash equivalents Ps 1,449 Ps 2,481 US$129 US$ 221 US$ 92 Accounts
receivable 5,117 5,615 456 500 44 Other current assets 965 1,133 86
101 15 Total current assets 7,531 9,229 670 822 151 23% Accounts
receivable from Unefon2,089 1,798 186 160 (26) Property, plant and
equipment-Net 2,320 2,185 207 195 (12) Television concessions-Net
3,890 3,852 346 343 (3) Invesment in Unefon 1,826 -- 163 -- (163)
Invesment in Todito 333 215 30 19 (11) Investment in Azteca America
1,200 1,451 107 129 22 Exhibition rights 1,4341,192 128 106 (22)
Other assets 861 679 77 60 (16) Goodwill -Net 667 591 59 53 (7)
Total long term assets 14,989 11,963 1,334 1,065 (269) -20% Total
assets Ps 22,520 Ps 21,192 US$ 2,005 US$ 1,887 US$(118) -6% Current
liabilities: Short-term debt Ps 455 Ps 779 US$ 41 US$ 69 US$ 29
Guaranteed senior notes 1,404 125 125 Other current liabilities
1,580 1,580 141 141 -- Total current liabilities 2,035 3,763 181
335 154 85% Long-term liabilities Guaranteed senior notes 4,593
3,370 409 300 (109) Bank loans 61 619 5 55 50 Subtotal debt 4,654
3,989 414 355 (59) Exhibition rights payable 256 120 23 11 (12)
American Tower Corporation (due 2069) 1,294 1,345 115 120 5
Advertising advances 4,623 4,903 412 437 25 6% Unefon advertising
advance 2,253 2,075 201 185 (16) Todito advances 524 320 47 28 (18)
Deferred income tax payable 27 78 2 7 5 Total long-term liabilities
13,631 12,830 1,214 1,142 (71) -6% Total liabilities 15,666 16,593
1,395 1,477 83 6% Total stockholders' equity 6,854 4,599 610 409
(201)-33% Total liabilities and equity Ps 22,520 Ps 21,192 US$
2,005 US$ 1,887 US$(118) %6% End of period exchange rate Ps 10.40
Ps 11.23 * Mexican GAAP. ** The U.S. dollar figures represent
Mexican peso amounts as of December 31, 2003, expressed as of
December 31, 2003 purchasing power, translated at the exchange rate
of Ps. 11.23 per U.S. dollar. TV AZTECA, S.A. DE C.V. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS* (Millions of Mexican
pesos of December 31, 2003 purchasing power) At December 31, 2003
TV Azteca Unefon Holdings TV Azteca Before split off Post split off
Current assets: Cash and cash equivalents Ps 2,481 Ps 2,481
Accounts receivable 5,615 5,615 Other current assets 1,133 1,133
Total currentassets 9,229 -- 9,229 Accounts receivable from Unefon
1,798 1,798 Property, plant and equipment-Net 2,185 2,185
Television concessions-Net 3,8523,852 Invesment in Unefon 513 Ps
513 -- Invesment in Cosmofrecuencias 116 116 -- Invesment in Todito
215 215 Investment in Azteca America 1,451 1,451 Exhibition rights
1,192 1,192 Other assets 679 679 Goodwill -Net 591 591 Total long
term assets 12,592 629 11,963 Total assets Ps 21,821 Ps 629 Ps
21,192 Current liabilities: Short-term debt Ps 779 Ps 779
Guaranteed senior notes 1,404 1,404 Other current liabilities 1,580
1,580 Total current liabilities 3,763 -- 3,763 Long-term
liabilities Guaranteed senior notes 3,370 3,370 Bank loans 619 619
Subtotal debt 3,989 3,989 Exhibition rights payable 120 120
American Tower Corporation (due 2069) 1,345 1,345 Advertising
advances 4,903 4,903 Unefon advertising advance 2,075 2,075 Todito
advances 320 320 Deferred income tax payable 78 78 Total long-term
liabilities 12,830 12,830 Total liabilities 16,593 -- 16,593 Total
stockholders' equity 5,228 Ps 629 4,599 Total liabilities and
equity Ps 21,821 Ps 629 Ps 21,192 End of period exchange rate Ps
11.23 -- * Mexican GAAP. TV AZTECA, S.A. DE C.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION Millions
of Mexican pesos of December 31, 2003 purchasing power Year ended
December 31, Operations: 2002 2003 Net income Ps 1,023 Ps 1,577
Charges (credits) to results of operation not affecting resources:
Amortization of goodwill 44 39 Depreciation 357 330 Equity in loss
of affiliates 116 48 Deferred income tax 27 132 Gain on sale of
subsidiaries (2) Net change in accounts receivable, inventories,
exhibition rights, related parties, accounts payable and accrued
expenses (124) (575) Unefon advertising advances (95) (178) Todito
advertising, programming, and services advances (219) (205)
Advertising advances (201) 280 Resources provided by operations 928
1,446 Investment: Acquisition ofproperty, machinery and equipment
-Net (250) (172) Split off of investments in Unefon and
Cosmofrecuencias 2,194 Advance payments to Pappas Telecasting
Companies, through Azteca America (474) Reimbursement of premium on
issuance of capital stock of Todito 34 Minority interest 1 (10)
Resources (used in) provided by investing activities (723) 2,046
Financing: Guaranteed senior notes 315 180 Bank loans -Net (348)
934 Loan granted to related party (207) Stock optionsexercised 25
29 Preferred dividend paid (42) (37) Repurchase of shares (177) -
Sale of treasury shares 142 100 Capital stock decrease - (1,442)
Changes resulting from the split off of investments in Unefon and
Cosmofrecuencias (2,124) Financial instruments (180) (100)
Resources used in financing activities (472) (2,460) (Decrease)
increase in cash and cash equivalents (267) 1,032 Cash and cash
equivalents at beginning of period 1,716 1,449 Cash and cash
equivalents at end of period Ps 1,449 Ps 2,481 DATASOURCE: TV
Azteca, S.A. de C.V. CONTACT: Investor Relations: Bruno Rangel,
+5255-3099-9167, , or Omar Avila, +5255-3099-0041, ; or Media
Relations: Tristan Canales, +5255-3099-5786, , or Daniel McCosh,
+5255 3099 0059, , all of TV Azteca, S.A. de C.V. Web site:
http://www.tvazteca.com.mx/
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