TV Azteca Announces 1Q05 EBITDA of Ps.630 Million (US$56 Million) With a 38% Margin- Net Sales Up 4%, to All-Time Record Level for a 1Q- - Net Income Grows 6% to Ps.202 million (US$18 million)-
Wednesday, April 20, 2005 11:34:32 PM ET
MEXICO CITY, April 20, 2005 /PRNewswire-FirstCall / -- TV Azteca,
S.A. de C.V. (TZA ), one of the two largest
producers of Spanish language television programming in the world, announced
today first quarter net sales up 4% to a record level of Ps.1,668 million
(US$148 million), and EBITDA of Ps.630 million (US$56 million), unchanged from
the prior year period. EBITDA margin for the quarter was 38%.
"Despite challenging comparables due to fewer working days and the Holy Week
this quarter, we managed to deliver the highest 1Q revenue level ever recorded
by the company," said Mario San Roman, Chief Executive Officer of TV Azteca.
"Solid drivers of growth in Mexico and in the US allowed us to continue with an
uninterrupted trend of five years of top line increases."
"On the strategic front, in close adherence to our cash-usage plan, we are on
track to submit for shareholders approval later this month distributions of
US$80 million planned for 2005, as previously approved by our board," added Mr.
As has been detailed, the companys plan for uses of cash entails distributions
of over US$500 million and reductions in TV Aztecas debt by approximately
US$250 million within a six-year period that started in 2003.
First Quarter Results
Net sales grew 4% to a record high of Ps.1,668 million (US$148 million), up from
Ps.1,607 million (US$142 million) for the same quarter of 2004. Total costs and
expenses rose 6% to Ps.1,038 million (US$92 million), from Ps.979 million (US$87
million) for the same period last year.
The company reported EBITDA of Ps.630 million (US$56 million), compared with
Ps.628 million (US$56 million) in the first quarter of 2004. Net income was
Ps.202 million (US$18 million), 6% higher than Ps.191 million (US$17 million)
for the same period of 2004.
Millions of pesos(1) and dollars(2) except percentages and per share
Net Sales 1Q 2004 1Q 2005 US$ %
Pesos Ps. 1,607 Ps. 1,668
US$ US$ 142 US$ 148 5 +4%
Pesos Ps. 628 Ps. 630
US$ US$ 56 US$ 56 0 0%
Pesos Ps. 191 Ps. 202
US$ US$ 17 US$ 18 1 +6%
Income per ADS(4)
Pesos Ps. 1.03 Ps. 1.09
US$ US$ 0.09 US$ 0.10 0.01 +6%
(1) Pesos of constant purchasing power as of March 31, 2005.
(2) Conversion based on the exchange rate of Ps.11.29 per US dollar as of
March 31, 2005.
(3) EBITDA is Operating Profit Before Depreciation and Amortization under
(4) Calculated based on 185 million ADSs outstanding as of
March 31, 2005.
"Favorable economic conditions domestically, together with targeted programming
initiatives boosted sales in Mexico to record-high levels," said Mr. San Roman.
"Adding to the domestic dynamism, Azteca America further contributed to
consolidated top line expansion, with increases at both the network and the Los
First quarter revenue includes sales from Azteca America-the companys
wholly-owned broadcasting network focused on the US Hispanic market-of Ps.79
million (US$7 million), a 16% increase from Ps.68 million (US$6 million) for the
same period a year ago. Azteca America revenue this quarter was comprised of
Ps.43 million (US$4 million) in sales from the Los Angeles station KAZA-TV, and
Ps.35 million (US$3 million) from network sales.
TV Azteca also reported sales of programming to other countries of Ps.33 million
(US$3 million), compared with Ps.38 million (US$3 million) in the same period a
year ago. This quarters programming exports were primarily driven by the
companys novelas La Otra Mitad del Sol, sold in Latin America, as well as La
Hija del Jardinero, which was sold in European and Latin American markets.
TV Azteca reported Ps.33 million (US$3 million) in advertising sales to Unefon,
compared with Ps.35 million (US$3 million) in the first quarter of 2004. In
accordance with the terms of the advertising agreement between Unefon and TV
Azteca, during the first quarter Unefon paid to TV Azteca in cash the Ps.33
million (US$3 million) of advertising purchases placed within the prior three
During the first quarter of 2005, content and advertising sales to Todito.com
were Ps.29 million (US$3 million), compared with Ps.73 million (US$6 million) in
the same period of the prior year. This quarter marked the end of a five-year
service contract, entered in February 2000, in which TV Azteca acquired 50% of
Todito.com. The service contract provided for advertising time to Todito.com on
TV Azteca networks, the exclusive online use of the companys content by
Todito.com, and TV Azteca sales support to sell online advertising on
Todito.com. The value of the service agreement was US$100 million at the time of
the contracts execution.
Barter sales were Ps.65 million (US$6 million), compared with Ps.54 million
(US$5 million) in the same period of last year. Inflation adjustment of
advertising advances was Ps.53 million (US$5 million), compared with Ps.54
million (US$5 million) for the first quarter of 2004.
Costs and Expenses
The 6% increase in first quarter costs and expenses resulted from the combined
effect of a 10% rise in programming, production and transmission costs to Ps.766
million (US$68 million), from Ps.694 million (US$61 million) in the prior year
period, and a 5% decrease in administration and selling expense to Ps.272
million (US$24 million), from Ps.285 million (US$25 million) in the same quarter
a year ago.
"Within the dynamic economic environment in Mexico, we developed a number of
programming initiatives to better tap a rising domestic market," said Carlos
Hesles, Chief Financial Officer of TV Azteca. "The programming efforts increased
production costs, and simultaneously provided advertisers with ample choices to
reach their target markets, which had a positive effect on net sales."
Consistent with the increased production efforts this quarter, TV Aztecas
in-house produced content rose to 2,278 hours in the three month period a 9%
rise from 2,093 hours a year ago.
The 5% reduction in administration and selling expense reflects lower operating,
services, personnel and travel expenses in the first quarter, despite increasing
operations in Mexico and the US.
EBITDA and Net Income
The 4% increase in first quarter net sales, combined with the 6% growth in costs
and expenses, resulted in EBITDA of Ps.630 million (US$56 million), compared
with Ps.628 million (US$56 million) a year ago. The EBITDA margin was 38%,
compared with 39% in the same period of 2004.
Below EBITDA, the company recorded depreciation and amortization of Ps.97
million (US$9 million) from Ps.102 million (US$9 million) a year ago, primarily
reflecting a Ps.4 million (US$0.4 million) decline in the depreciation line due
to increases in fully depreciated assets this quarter.
The company recorded other expense of Ps.105 million (US$9 million), compared
with Ps.106 million (US$9 million) a year ago. Other expense for the quarter was
primarily comprised of legal fees of Ps.40 million (US$4 million), unchanged
from the first quarter a year ago, charitable donations of Ps.39 million (US$3
million), the recognition of 50% of the net loss of Todito.com of Ps.15 million
(US$1 million), pre-operating expenses of Azteca America of Ps.10 million (US$1
million), and the net effect of the recognition of the results from Monarcas-TV
Aztecas soccer team-and other items of Ps.1 million (US$0.1 million).
Net comprehensive financing cost during the quarter was Ps.181 million (US$16
million) compared with Ps.179 million (US$16 million) a year ago. There was a
Ps.33 million (US$3 million) decrease in interest income primarily resulting
from a reduction in the companys cash balance. Additionally, foreign exchange
gain decreased Ps.12 million (US$1 million) due to a reduction in TV Aztecas
US$ monetary position. Other financing expense rose Ps.7 million (US$1 million)
reflecting the payment of tax surcharges. Increases in net comprehensive
financing cost were partly offset by a Ps.45 million (US$4 million) reduction in
loss on monetary position resulting from symmetry of the companys monetary
assets and liabilities for the quarter.
Provision for income tax was Ps.45 million (US$4 million), compared with Ps.50
million (US$4 million) in the same period of the prior year, reflecting similar
taxable bases among the quarters.
Net income for the period was Ps.202 million (US$18 million), up 6% from Ps.191
million (US$17 million) for the same quarter of 2004.
During the quarter, TV Azteca signed a distribution agreement in which EchoStar
Communication Corporations DISH Network made Azteca America available
nationwide via satellite television, starting on April 1, 2005.
The parties signed a contract through which the Azteca America channel will be
available as part of EchoStars DISH Latino programming packages, and settled
all prior disputes. EchoStar has also obtained the right to air the 24-hour live
transmission of the companys musical reality show, La Academia 4, on another
"We are thrilled that viewers will now be able to turn from seeing TV Aztecas
channel 13 to our Networks programming, allowing Azteca America to benefit from
the tremendous subscriber growth that EchoStar has established during the past
five years," said Luis J. Echarte, President and CEO of Azteca America.
Azteca America Networks signal is seen through 39 affiliate stations across the
US, of which 30 have cable carriage and, in most cases, also satellite
transmission. The company anticipates that Azteca America Networks positive
results in reaching a growing number of US Hispanic markets will lead
advertisers to consider it a consolidated national network for the upcoming US
As of March 31, 2005, the companys total outstanding debt was Ps.6,470 million
(US$573 million). TV Aztecas cash balance was Ps.1,062 million (US$94 million),
resulting in net debt of Ps.5,408 million (US$479 million). The total debt to
last twelve months (LTM) EBITDA ratio was 1.8 times, and net debt to EBITDA was
1.5 times. LTM EBITDA to net interest expense ratio was 5.8 times.
Excluding-for analytical purposes-Ps.1,353 million (US$120 million) debt due
2069, total debt was Ps.5,117 million (US$453 million), and total debt to EBITDA
ratio was 1.4 times.
As previously announced, on November 24, 2004 the companys shareholders
approved measures for management oversight, which were approved by TV Aztecas
board on October 19, 2004. The company has advanced in its implementation, as
TV Azteca has completed the formation of its nominations committee with Ignacio
Morales Lechuga, Notary Public, former Mexicos General Prosecutor, and Dean of
the Escuela Libre de Derecho-one of Mexicos top law schools- Josť Represas,
Counsel for International Businesses and former President and CEO of Nestle
Mexico, and Andres Holzer, a renowned Mexican investor, with activities in the
manufacturing, services and real estate sectors. The nominations committee will
propose prospective independent board members for appointment by the companys
TV Azteca has named Pedro Zamora, former Enforcement Vice President at the
Mexican Banking and Securities Commission (CNBV) as the companys Chief
Oversight Officer. Mr. Zamora will supervise the compliance of the code of
business conduct and ethics of the company.
Pursuant to the resolution of the November 24, 2004 shareholders meeting, TV
Azteca included in its bylaws a new Audit Committee, which will consist of three
independent directors, who will take over, among others, the current
responsibilities of the Related Party Transactions Committee. The companys
Nominations Committee will propose the members of the Audit Committee to the
shareholders as discussed above.
TV Azteca noted that the rest of the management oversight measures are in
process of implementation, and are expected to be presented to the companys
shareholders for final approval prior to May 31.
As previously announced, on January 4 the US Securities and Exchange Commission
(SEC) issued a press release informing that it filed a civil action against the
company, its parent company, Ricardo B. Salinas, founder, chairman and majority
shareholder, and Pedro Padilla L., board member and former CEO, in a US Federal
TV Azteca is certain that the company, and its officers and directors acted in
full compliance with the applicable legal framework and are determined to
continue to do so, and to firmly defend what they believe to be correct. The
company, its officers and directors believe they will prevail because they acted
As was previously detailed, on October 6, 2003 TV Aztecas board unanimously
approved the split off of the companys 46.5% equity stake in Unefon and a 50%
stake in Cosmofrecuencias, a wireless broadband Internet access provider.
On December 19 of the same year, TV Azteca shareholders ratified the separation
of TV Aztecas telecommunications assets through the creation of Unefon
Holdings, returning TV Azteca to a pure media company. Unefon Holdings became a
legal Mexican entity independent from TV Azteca that same month.
On July 2004 Unefon Holdings began the registration process with the Mexican
Banking and Securities Commission (CNBV) and the Mexican Stock Exchange (BMV) to
have its shares listed on the BMV. Previously, Unefon Holdings applied to the
SEC for an exemption from registration of its shares in the US, to allow for
over-the-counter trading in the United States. Public trading of Unefon Holdings
will allow TV Azteca shareholders to receive the value of the telecommunications
business, and decide their participation in Unefon Holdings.
The SEC granted the exemption on October, 2004. Notwithstanding the CNBV made
several requests for additional financial and operating information for Unefon
Holdings, which has impeded Unefon Holdings from obtaining its registration.
Unefon Holdings has not received a decision, nor a date of a potential
definition of the listing on the BMV from Mexican authorities.
TV Azteca does not know the reasons for the delays at the CNBV, but is certain
that the lengthy decision making process adversely affects the companys
minority shareholders, who are not allowed to make investment decisions
regarding Unefon Holdings.
TV Azteca is one of the two largest producers of Spanish language television
programming in the world, operating two national television networks in Mexico,
Azteca 13 and Azteca 7, through more than 300 owned and operated stations across
the country. TV Azteca affiliates include Azteca America Network, a new
broadcast television network focused on the rapidly growing US Hispanic market,
and Todito.com, an Internet portal for North American Spanish speakers.
Except for historical information, the matters discussed in this press release
are forward-looking statements and are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
projected. Risks that may affect TV Azteca are identified in its Form 20-F and
other filings with the US Securities and Exchange Commission.
For more information: http://www.irtvazteca.com/SOURCE TV Azteca, S.A. de C.V.
CONTACT: Investors, Bruno Rangel, +5255-3099-9167, or firstname.lastname@example.org; or Media,
Tristan Canales, +5255-1720-5786, or email@example.com, or Daniel McCosh,
+5255-1720-0059, or firstname.lastname@example.org, all of TV Azteca, S.A. de C.V.
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