MATV Matav-Cable Systems Media Ltd. ADS (MM)

NETANYA, Israel, August 23 /PRNewswire-FirstCall/ -- Matav-Cable Systems Media Ltd. (NASDAQ:MATV), a leading Israeli provider of digital cable television services, today reported second-quarter 2005 financial results. Revenues for the second-quarter reached NIS 135.8 million (US$29.7 million) compared with NIS 150.9 million (US$33 million) for the second quarter of 2004 and NIS 137.5 million (US$30.1 million) for the first quarter of 2005. The decrease in revenues compared with the previous quarter is a result of the decrease in Matav's multi-channel television subscribers, which was partially off-set by the increase in the Company's ARPU. As of June 30, 2005, Matav had 252,207 subscribers, compared with 254,157 as of March 31, 2005. Matav reported an increase in Internet subscribers reaching approximately 99,000 subscribers to date. During second-quarter 2005, the company's ARPU stabilized reaching NIS 202 (monthly, including 17% value-added tax) compared to NIS 212.3 in the second quarter of 2004 and NIS 201.6 in the first quarter of 2005. Revenues for the six-month period reached NIS 273.3 million (US$59.8 million) compared with NIS 298.5 million (US$65.3 million) in the comparable period in 2004. Matav's financial results are not consolidated with Hot Telecom (Matav's telephony & corporate data joint partnership with the two other Israeli cable companies). Hot Telecom's revenues in the second quarter reached NIS 11.3 million (US$2.5 million), as compared to NIS 6.5 million (US$1.4 million) for the first quarter of 2005 and NIS 8.8 million (US$1.9 million) for the entire year 2004. As of now, approximately 36,000 subscribers joined this new telephony service. Second-quarter operating expenses decreased to NIS 118 million (US$25.8 million) from NIS 120.6 million (US$26.4 million) in second-quarter 2004 and similar to the first quarter of 2005. Operating expenses for the six-month period totaled NIS 236.2 million (US$51.6 million) compared with 240.9 million (US$52.7 million) for the comparable period in 2004. The six-month period results include operating expenses related to the launch of new services, such as VoD. Second-quarter gross profit totaled NIS 17.7 million (US$3.9 million) compared with NIS 30.3 million (US$6.6 million) in second-quarter 2004 and NIS 19.3 million (US$4.2 million) for the first-quarter of 2005. Gross profit for the six-month period decreased to NIS 37.1 million US$8.1 million) from 57.6 million (US$12.6 million) in the comparable period in 2004. Second-quarter selling and marketing expenses totaled NIS 13.3 million (US$2.9 million), compared with NIS 16.5 million (US$3.6 million) for second-quarter 2004 and compared to NIS14.6 million (US$3.2 million) for the first quarter of 2005 .Selling and marketing expenses for the six-month period decreased to NIS 27.9 million (US$6.1 million) compared with 31.4 million (US$6.9 million) for the comparable period in 2004. Second-quarter G&A expenses reached NIS 10.5 million (US$2.3 million) compared with NIS 10.4 million (US$2.3 million) in second-quarter 2004 and NIS 9.6 million (US$2.1 million) for the first quarter of 2005. G&A expenses for the six-month period totaled NIS 20.1 million (US$4.4 million), compared to NIS 20.5 million (US$4.5 million) for the comparable period in 2004. Second-quarter operating loss totaled NIS 6 million (US$1.3 million), compared with an operating profit of NIS 3.3 million (US$0.7 million) for second-quarter 2004, and an operating loss of NIS 4.8 million (US$1 million) for the first quarter of 2005. Operating loss for the six-month period totaled NIS 10.9 million (US$2.4 million), compared with an operating profit of 5.7 million (US$1.2 million) for the comparable period in 2004. Second-quarter financing expenses declined to NIS 15.2 million (US$3.3 million) from NIS 16.2 million (US$3.5 million) in the comparable quarter of 2004. The decrease is attributed mainly to the decrease in interest rates. Other income, net for the second quarter totaled NIS 163.4 million (US$35.7 million). The Company recognized a capital gain from the sale of Partner Communications' shares (in April 2005) of NIS 164.6 million, before tax impact. Income from taxes were influenced from a settlement reached with the Israeli Tax Authorities during July 2005. According to the settlement, Matav recognized a portion of the gain from the sale of Partner shares, which was offset against Matav's carry-forward tax losses. Matav's share in affiliated companies' losses for the second quarter of 2005 was NIS 2.5 million (US$0.5 million). This is attributed to Hot Telecom's losses. Since the second quarter of 2005, Matav is not incurring equity profits of Partner Communications due to the sale of most of its shares in Partner. Matav holds 1.2% of Partners' shares, which do not give Matav significant influence according to generally accepted accounting principles in Israel. Matav's share in affiliated companies' profits for the second quarter of 2004 was NIS 2.6 million (US$0.6 million), which is due to Partner Communications' profits, off-set by HOT Telecom's losses. Matav reported second-quarter net income of NIS 145.5 million (US$31.8 million), or NIS 4.81 (US$1.05) per ordinary share, compared with a net loss of NIS 28.2 million (US$6.2 million), or NIS 0.96 (US$0.2) per ordinary share, for the second quarter of 2004. Net Income for the six-month period reached NIS 132.2 million (US$28.9 million), or NIS 4.37 (US$0.96) per ordinary share, compared with a net loss of NIS 35.2 million (US$7.7 million), or NIS 1.2 (US$0.26), for the same period in 2004. Second-quarter EBITDA reached NIS 25.8 million (US$5.6 million) compared with NIS 37.8 million (US$8.3 million) in second-quarter 2004 and NIS 27.9 million (US$6.1 million) in first quarter 2005. EBITDA for the six-month period totaled NIS 53.7 million (US$11.7 million), compared with NIS 74.1 million (US$16.2 million) in the comparable period in 2004. Matav's Chairman of the Board and CEO, Meir Srebernik, commented: "The second quarter of 2005 was characterized by lower churn along with stability in our ARPU level, which led to a lower decrease in our overall revenue level. We are witnessing an ongoing increase in the number of subscribers to our new premium services, which we are offering as part of our triple-play strategy, such as VOD, fast-Internet, and telephony services. We believe that these advanced services contribute to our customers' satisfaction and loyalty, and we believe that this will cause continued decrease in our subscriber loss rate and stimulate revenue growth." Management will conduct a teleconference tomorrow, August 24, 2005 at 10:00 a.m. U.S. Eastern Time. To participate, please dial 1-866-500-4964 in the United States and 011-972-3-9255910 internationally, several minutes prior to the start of the conference. Matav is one of Israel's three cable television providers, serving roughly 25 percent of the population. Matav's current investments include 1.2 percent of Partner Communications Ltd., a GSM mobile phone company and 10 percent of Barak I.T.C. (1995) Ltd., one of the three international telephony providers in Israel. (This press release contains forward-looking statements with respect to the Company's business, financial condition and results of operations. These forward-looking statements are based on the current expectations of the management of Matav Cable only, and are subject to risk and uncertainties, including but not limited to changes in technology and market requirements, decline in demand for the Company's products, inability to timely develop and introduce new technologies, products and applications, loss of market share and pressure on pricing resulting from competition, which could cause the actual results or performance of the Company to differ materially from those contemplated in such forward-looking statements. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. For a more detailed description of the risk and uncertainties affecting the Company, reference is made to the Company's reports filed from time to time with the Securities and Exchange Commission.) Contacts: Ori Gur-Arieh, Counsel Matav Cable Systems Telephone: +972-9-860-2261 Ayelet Shaked Shiloni Integrated IR Telephone US: +1-866-447-8633 / Israel: +972-3-635-6790 E-Mail: MATAV - CABLE SYSTEMS MEDIA LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) Convenience translation December 31, June 30, June 30, 2004 2004 2005 2005 AUDITED UNAUDITED UNAUDITED Reported NIS In thousands (1) U.S. dollars ASSETS CURRENT ASSETS: Cash and cash equivalents 24,250 29,130 253,082 55,331 Short-term deposit 50 - 50 11 Trade receivables 75,458 81,122 78,849 17,239 Other accounts receivables 20,010 15,242 21,769 4,759 Total current assets 119,768 125,494 353,750 77,340 INVESTMENTS AND LONG-TERM RECEIVABLES: Investments in affiliates 101,736 77,722 25,132 5,495 Investment in limited partnerships 1,656 1,597 1,405 307 Investments in other companies - - 19,278 4,215 Rights to broadcast movies and programs 26,509 36,848 29,731 6,500 Other receivables 601 607 311 68 130,502 116,774 75,857 16,585 PROPERTY, PLANT AND EQUIPMENT: Cost 2,119,060 2,066,478 2,188,896 478,552 Less - accumulated depreciation 1,293,549 1,223,984 1,363,259 298,045 825,511 842,494 825,637 180,507 INTANGIBLE ASSETS AND DEFERRED CHARGES, NET 3,101 3,477 2,765 605 1,078,882 1,088,239 1,258,009 275,037 (1) Nominal financial reporting beginning January 1, 2004. MATAV - CABLE SYSTEMS MEDIA LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) Convenience translation December 31, June 30, June 30, 2004 2004 2005 2005 AUDITED UNAUDITED UNAUDITED Reported NIS In thousands (1) U.S. dollars LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Bank credit 465,339 422,277 517,994 113,248 Current maturities of debentures 34,005 34,107 34,175 7,472 Accounts payable and accruals: Trade 104,282 97,617 103,070 22,534 Jointly controlled entity - current accounts 18,112 10,993 15,330 3,352 Other accounts payable 201,943 170,847 214,214 46,833 Total current liabilities 823,681 735,841 884,783 193,439 LONG-TERM LIABILITIES: Accrued severance pay, net 2,483 2,276 3,175 694 Loans and debentures (net of current maturities): Loans from banks and others 101,457 113,904 88,250 19,294 Debentures 33,201 67,170 33,612 7,349 Customers' deposits for converters, net of accumulated amortization 20,279 23,529 18,190 3,977 Total long-term liabilities 157,420 206,879 143,227 31,314 Total liabilities 981,101 942,720 1,028,010 224,753 SHAREHOLDERS' EQUITY: Share capital 48,899 48,899 48,901 10,691 Additional paid-in capital 375,538 375,538 375,538 82,103 Accumulated deficit (326,656) (278,918) (194,440) (42,510) Total shareholders' equity 97,781 145,519 229,999 50,284 1,078,882 1,088,239 1,258,009 275,037 (1) Nominal financial reporting beginning January 1, 2004. MATAV - CABLE SYSTEMS MEDIA LTD. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share and per ADS data) Convenience translation Six months Three months ended Six months ended ended June 30, June 30, June 30, 2004 2005 2004 2005 2005 U.S. Reported NIS In thousands (1) dollars UNAUDITED UNAUDITED UNAUDITED UNAUDITED UNAUDITED Revenues 150,891 135,806 298,528 273,270 59,744 Operating expenses 120,639 118,092 240,904 236,212 51,642 Gross profit 30,252 17,714 57,624 37,058 8,102 Selling, marketing, general and administrative expenses: Selling and marketing 16,496 13,262 31,382 27,880 6,095 General and administrative 10,415 10,493 20,530 20,059 4,385 26,911 23,755 51,912 47,939 10,480 Operating income (loss) 3,341 (6,041) 5,712 (10,881) (2,378) Financial expenses, net(16,234) (15,216) (28,491) (27,012) (5,906) Other income (expenses), net (17,968) 163,361 (18,726) 163,504 35,746 Income (loss) before taxes on income (30,861) 142,104 (41,505) 125,611 27,462 Taxes on income - (5,900) - (5,853) (1,280) Income (loss) after taxes on income (30,861) 148,004 (41,505) 131,464 28,742 Equity in earnings (losses) of affiliates, net 2,620 (2,531) 6,259 752 164 Net income (loss) (28,241) 145,473 (35,246) 132,216 28,906 Net income (loss) per ordinary share (0.96) 4.81 (1.2) 4.37 0.96 Net income (loss) per ADS (1.92) 9.62 (2.4) 8.74 1.92 Weighted average number of shares outstanding in thousands 29,361 30,221 29,357 30,221 30,221 Weighted average number of ADSs outstanding in thousands 14,681 15,111 14,679 15,111 15,111 EBITDA calculation: Operating income (loss) 3,341 (6,041) 5,712 (10,881) (2,378) Net of the effect of proportional consolidation (254) (1,725) (2,298) (2,754) (602) Depreciation and amortization (including income from amortization of deposits for converters) 34,746 33,573 70,702 67,369 14,729 Memo EBITDA(*) - not including proportional consolidation 37,833 25,807 74,116 53,734 11,749 (1) Nominal financial reporting beginning January 1, 2004. (*) EBITDA is presented because it is a measure commonly used in the telecommunications industry and is presented solely in order to improve the understanding of the Company's operating results and to provide further a perspective regarding these results. EBITDA, however, should not be considered as an alternative to operating income or income for the year as an indicator of the operating performance of the Company. Similarly, EBITDA should not be considered as an alternative to cash flows from operating activities as a measure of liquidity. EBITDA is not a measure of financial performance under generally accepted accounting principles and may not be comparable to other similarly titled measures for other companies. EBITDA may not be indicative of the historic operating results of the Company. Nor is meant to be predictive of potential future results. Reconciliation between the operating profit in the financial statements and EBIDTA is presented in the attached summary financial statements. DATASOURCE: Matav - Cable Systems Media Ltd. CONTACT: Ori Gur-Arieh, Counsel, Matav Cable Systems, Telephone: +972-9-860-2261, Ayelet Shaked Shiloni; Integrated IR, Telephone US: +1-866-447-8633 / Israel: +972-3-635-6790, E-Mail:

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