Claxson Interactive (NASDAQ:XSON)
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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/