Claxson Reports 2005 Second Quarter Financial Results; Company Reports Solid Operating Income Growth in Second Quarter.BUENOS AIRES Buenos Aires (bwā`nəs ī`rēz, âr`ēz, Span. bwā`nōs ī`rās), city and federal district (1991 pop. -- Claxson Interactive Group Inc. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). :XSONF) ("Claxson" or the "Company"), today announced financial results for the three and six-month periods ended June June: see month. 30, 2005. . As previously announced, the Company finalized See finalization. the sale of its TV Broadcast operation Chilevision on April 18. In addition, on May 6, Claxson completed the sale of the language localization Customizing software and documentation for a particular country. It includes the translation of menus and messages into the native spoken language as well as changes in the user interface to accommodate different alphabets and culture. See internationalization and l10n. operations of The Kitchen. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with applicable accounting principles, the assets, liabilities and operations of Chilevision and the language localization operations of The Kitchen are reflected as assets and liabilities held for sale in the balance sheet and as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. in the statement of operations See Income statement. of the Company until the time of their sale. Financial Highlights Second Quarter 2005 Net revenue for the second quarter of 2005 was $19.1 million, a 23% increase from net revenue of $15.5 million for the second quarter of 2004. Operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. for the three months ended June 30, 2005 was $15.4 million, a 23% increase from the $12.5 million for the second quarter of 2004. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased to $3.7 million for the three-month period ended June 30, 2005 from $3.0 million for the three-month period ended June 30, 2004. Foreign currency exchange gain for the three-month period ended June 30, 2005 was $0.5 million, a total $1.8 million positive effect compared to the $1.3 million loss in the same period of 2004. Net income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the three months ended June 30, 2005 was $2.8 million ($0.14 per basic and $0.13 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share), compared to $1.3 million ($0.07 per basic and diluted share) for the same period in 2004. Net income for the three months ended June 30, 2005 was $1.2 million ($0.06 per basic and $0.05 per diluted share), compared to $2.3 million ($0.10 per basic and $0.11 per diluted share) for the same period in 2004. During the second quarter of 2005, the average exchange rate of the Argentine Argentine having some relationship with the country Argentina. Argentine tick margaropuswinthemi. Argentine tortoise geochelonechilensis. and Chilean currencies compared to the U.S. dollar remained unchanged and appreciated 8%, respectively, versus the same period in 2004. First Six Months of 2005 Net revenue for the six-month period ended June 30, 2005 was $36.9 million, a 21% increase compared to $30.6 million for same period in 2004. Operating expense for the six-month period ended June 30, 2005 was $30.3 million, an 11% increase compared to $27.3 million in the same period of 2004. Operating income was $6.6 million for the six-month period ended June 30, 2005 compared to $3.3 million for the same period in 2004. Foreign currency exchange gain for the six-month period ended June 30, 2005 was $1.1 million, a total $1.4 million positive effect compared to the $0.3 million loss in the same period of 2004. Net income from continuing operations for the six-month period ended June 30, 2005 was $5.1 million ($0.25 per basic and $0.23 per diluted share), compared to $2.4 million ($0.12 per basic and diluted share) for the same period in 2004. Net income for the six-month period ended June 30, 2005 was $2.6 million ($0.13 per basic and $0.12 per diluted share), compared to $2.5 million ($0.13 per basic and $0.12 per diluted share) for the same period in 2004. During the six-month period ended June 30, 2005, the average exchange rate of the Argentine and Chilean currencies compared to the U.S. dollar remained unchanged and appreciated 5%, respectively, versus the same period in 2004.
CLAXSON
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS - INFORMATION
BY SEGMENT
(In Thousands of U.S. dollars)
Operating Deprec- Consolidated
expenses iation Operating
Net (before depr. & amorti- Total Income
Revenues and amort.) zation expenses (loss)
--------- ------------- ---------- -------- ------------
For the Three
Months Ended
June 30,
2005
Pay TV $13,975 $9,976 $453 $10,429 $3,546
Broadcast 5,009 3,304 453 3,757 1,252
Internet &
Broadband 31 218 - 218 (187)
Corporate 72 1,027 - 1,027 (955)
--------- ------------- ---------- -------- ------------
Total $19,087 $14,525 $906 $15,431 $3,656
2004
Pay TV $11,768 $8,143 $679 $8,822 $2,946
Broadcast 3,692 2,457 388 2,845 847
Internet &
Broadband 31 279 7 286 (255)
Corporate - 578 - 578 (578)
--------- ------------- ---------- -------- ------------
Total $15,491 $11,457 $1,074 $12,531 $2,960
Operating Deprec- Consolidated
expenses iation Operating
Net (before depr. & amorti- Total Income
Revenues and amort.) zation expenses (loss)
--------- ------------- ---------- -------- ------------
For the Six
Months Ended
June 30,
2005
Pay TV $26,274 $19,146 $1,004 $20,150 $6,124
Broadcast 10,388 6,722 922 7,644 2,744
Internet &
Broadband 60 445 - 445 (385)
Corporate 144 2,056 - 2,056 (1,912)
--------- ------------- ---------- -------- ------------
Total $36,866 $28,369 $1,926 $30,295 $6,571
2004
Pay TV $22,607 $17,318 $1,520 $18,838 $3,769
Broadcast 7,924 5,151 818 5,969 1,955
Internet &
Broadband 57 540 7 547 (490)
Corporate - 1,904 - 1,904 (1,904)
--------- ------------- ---------- -------- ------------
Total $30,588 $24,913 $2,345 $27,258 $3,330
"We are very pleased with the overall results of the second quarter and first six months of 2005. We have seen a consistent growth in our consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: net revenues which resulted in significant improvements in operating income," said Roberto Roberto Rome, Berlin, Tokyo (WW2 Axis) Vivo, Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "These results and the performance of the management team make me confident that we are well prepared to face the challenges ahead." Pay TV Net revenue for the second quarter of 2005 was $14.0 million, a 19% increase from net revenue of $11.8 million for the second quarter of 2004. The increase in net revenue is principally attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to an increase in subscriber-based fees and advertising. Net revenue for the six-month period ended June 30, 2005 was $26.3 million compared to $22.6 million for the same period of 2004. The increase is primarily a result of increase subscriber-based fees and advertising revenues. Operating expense (excluding depreciation and amortization) for the second quarter of 2005 was $10.0 million compared to $8.1 million for the same period in 2004. The increase is principally attributable to increased programming and production costs as a result of additional investment in programming, as well as increased sales expenses related to the increase in revenues. Operating expense for the six-month period ended June 30, 2005 was $19.1 million compared to $17.3 million for the same period of 2004. Operating income for the second quarter of 2005 was $3.5 million compared to an operating income of $2.9 million for the same period in 2004. Operating income for the six-month period ended June 30, 2005 was $6.1 million compared to $3.8 million for the same period of 2004. As of June 30, 2005, the Company's owned basic and premium channels reached 47.3 million aggregate subscribers, a 17% growth compared to its subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. base as of June 30, 2004. FTV FTV Fashion TV FTV First Time Video FTV Free to View (satellite television) FTV Flight Test Vehicle FTV Finish the Verse FTV Functional Test Vehicle FTV Franchise Tax voucher (California ) and Retro were the Company's owned channels that reported the strongest growth. Broadcast Radio Net revenue for the second quarter of 2005 was $5.0 million, a 36% increase from net revenue of $3.7 million for the second quarter of 2004. The increase is primarily attributable to improved audience share in Chile Chile (chĭl`ē, Span. chē`lā), officially Republic of Chile, republic (2005 est. pop. 15,981,000), 292,256 sq mi (756,945 sq km), S South America, west of the continental divide of the Andes Mts. as well as an 8% appreciation in the Chilean peso as compared to 2004. Net revenue for the six-month period ended June 30, 2005 was $10.4 million compared to $7.9 million for the same period of 2004. This increase is primarily a result of the increased audience share in Chile as well as a general improvement of the operations of Sarandi in Uruguay Uruguay, country, South America Uruguay (y  `rəgwā, gwī, Span.  r .Operating expense (excluding depreciation and amortization) for the second quarter of 2005 was $3.3 million compared to $2.5 million for the same period in 2004. The increase is due to the appreciation of the Chilean peso, and the development of the new businesses and increased sales and marketing expenses. Operating expense for the six-month period ended June 30, 2005 was $6.7 million compared to $5.2 million for the same period of 2004. As was the case in the second quarter, this increase is explained by the appreciation of the Chilean Peso and the increase in production and sales expenditures. Operating income for the second quarter of 2005 was $1.3 million compared to $0.9 million for the same period in 2004. Operating income for the six-month period ended June 30, 2005 was $2.7 million compared to $2.0 million for the same period of 2004. During the second quarter of 2005, Ibero American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Radio Chile's average audience share was 38%, compared to 35% for the same period in 2004. Broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). & Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the Net revenue for the second quarters of both 2005 and 2004 was $31,000. Net revenue for the six-month period ended June 30, 2005 was $60,000 compared to $57,000 for the same period of 2004. Operating expense (excluding depreciation and amortization) for the second quarter of 2005 was $0.2 million compared to $0.3 million for the same period in 2004. Operating expense for the six-month period ended June 30, 2005 was $0.5 million compared to $0.5 million for the same period of 2004. Operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the second quarter of 2005 was $0.2 million compared to a $0.3 million loss for the same period in 2004. Operating income for the six-month period ended June 30, 2005 was $0.4 million compared to $0.5 million for the same period of 2004. Liquidity As of June 30, 2005, Claxson had cash and cash equivalents of $21.1 million and $82.1 million in debt, which includes $14.8 million in future interest payments on the Company's 8.75% Senior Notes due in 2010. For the six-month period ended June 30, 2005, Claxson operating activities generated cash flows of $6.8 million compared to $0.9 million for the same period of 2004. The difference is primarily due to the improved operating results. Cash generated from operating activities was primarily used for the payment of debt obligations and for capital expenditures. In addition, during the second quarter Claxson received $11.1 million, net of transaction expenses paid, from the sale of assets (primarily Chilevision) and an additional $1.0 million in restricted funds that serve as a holdback hold·back n. 1. a. The act of holding back. b. Something held back. 2. A device that retains or restrains. 3. for potential indemnification Indemnification Used in insurance policy agreements as to compensation for damage or loss. In the context of corporate governance, Director Indemnification uses the bylaws and/or charter to indemnify officers and directors from certain legal expenses and judgements resulting from payable on the first anniversary of the closing. As part of the terms of the Chilevision sale, we retained approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $5.9 million of Chilevision's account receivable account receivable Any amount owed to a business as the result of a purchase of goods or services from it on a credit basis. Although the firm making the sale receives no written promise of payment, it enters the amount due as a current asset in its books. which are being collected as expected. About Claxson Claxson (XSONF.OB) is a multimedia company providing branded entertainment Branded Entertainment, also known as Branded content or Advertainment, is the combination of an audio-visual program (TV, radio, podcast, etc.) and a brand. It can be initiated either by the brand or by the broadcaster. content targeted to Spanish Spanish, river, c.150 mi (240 km) long, issuing from Spanish Lake, S Ont., Canada, NW of Sudbury, and flowing generally S through Biskotasi and Agnew lakes to Lake Huron opposite Manitoulin island. There are several hydroelectric stations on the river. and Portuguese speakers around the world. Claxson has a portfolio of popular entertainment brands that are distributed over multiple platforms Refers to two or more operating environments, which typically include the CPU family and operating system. For example, if versions of a program run on Windows and the Macintosh, the software is said to support multiple platforms. through its assets in pay television, radio and the Internet. Headquartered in Buenos Aires, Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. , and Miami, Florida “Miami” redirects here. For the Native American tribe, see Miami tribe. Miami is a major city in southeastern Florida, in the United States. It is the county seat of Miami-Dade County. Miami is a gamma world city with an estimated population of 404,048. , Claxson has a presence in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and all key Ibero-American countries, including without limitation, Argentina, Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. , Chile, Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. , Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. and Portugal Portugal (pôr`chəgəl), officially Portuguese Republic, republic (2005 est. pop. 10,566,000), 35,553 sq mi (92,082 sq km), SW Europe, on the western side of the Iberian Peninsula and including the Madeira Islands and the Azores in the . Claxson's principal shareholders are the Cisneros Group The Cisneros Group of Companies is one of the largest, privately held media, entertainment, telecommunications and consumer products organizations in the world. The Group owns or holds interests in companies ranging from broadcast television, networks and pay television businesses of Companies and funds affiliated af·fil·i·ate v. af·fil·i·at·ed, af·fil·i·at·ing, af·fil·i·ates v.tr. 1. To adopt or accept as a member, subordinate associate, or branch: with Hicks Hicks , Edward 1780-1849. American painter of primitive works, notably The Peaceable Kingdom, of which nearly 100 versions exist. , Muse, Tate & Furst Inc. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the U.S. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 July: see month. 15, 2005.
CLAXSON
UNAUDITED BALANCE SHEETS
(In Thousands of U.S. dollars)
As of As of
June 30, December 31,
2005 2004
---------------- ----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $21,065 $7,270
Accounts receivable, net 20,577 23,018
Assets held for sale - 25,599
Other current assets 5,895 8,698
Restricted investments 1,009 -
---------------- ----------------
Total current assets 48,546 64,585
PROPERTY AND EQUIPMENT, net 10,483 11,048
PROGRAMMING RIGHTS, net 4,437 4,028
INVESTMENTS IN UNCONSOLIDATED
AFFILIATES 2,233 3,407
INVESTMENTS IN EQUITY SECURITIES 306 54
GOODWILL 50,110 51,021
BROADCAST LICENSES, net 15,506 16,722
OTHER ASSETS 7,365 5,650
---------------- ----------------
TOTAL ASSETS $138,986 $156,515
================ ================
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable, accrued and
other liabilities $23,654 24,444
Liabilities related to assets
held for sale - 14,927
Current portion of programming
rights obligations 5,152 5,332
Current portion of long-term debt 9,053 8,172
---------------- ----------------
Total current liabilities 37,859 52,875
LONG-TERM LIABILITIES:
Long-term debt, net of current
portion 73,019 77,680
Other long-term liabilities 2,749 2,795
---------------- ----------------
Total long-term liabilities 75,768 80,475
MINORITY INTEREST 334 562
SHAREHOLDERS' EQUITY 25,025 22,603
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $138,986 $156,515
================ ================
CLAXSON
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of U.S. dollars, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2005 2004 2005 2004
--------- -------- -------- --------
NET REVENUES:
Subscriber-based fees $11,123 $9,928 $21,679 $19,439
Advertising 6,839 5,185 13,005 10,397
Production services 374 141 651 246
Other 751 237 1,531 506
--------- -------- -------- --------
Total net revenues 19,087 15,491 36,866 30,588
--------- -------- -------- --------
OPERATING EXPENSES:
Product, content and technology 6,956 6,148 13,898 12,212
Marketing and sales 3,583 2,092 6,721 5,452
Corporate and administration 3,986 3,217 7,750 7,249
Depreciation and amortization 906 1,074 1,926 2,345
--------- -------- -------- --------
Total operating expenses 15,431 12,531 30,295 27,258
--------- -------- -------- --------
OPERATING INCOME 3,656 2,960 6,571 3,330
INTEREST EXPENSE (337) (475) (718) (874)
OTHER INCOME (EXPENSE), NET 315 (249) 791 (58)
FOREIGN CURRENCY EXCHANGE GAIN
(LOSS) 486 (1,332) 1,095 (343)
NET (LOSS) INCOME FROM
UNCONSOLIDATED AFFILIATES (1,041) 679 (1,597) 876
--------- -------- -------- --------
INCOME BEFORE INCOME TAXES ,
MINORITY INTEREST AND
DISCONTINUED OPERATIONS 3,079 1,583 6,142 2,931
INCOME TAXES (349) (243) (1,290) (521)
MINORITY INTEREST 83 (24) 236 3
--------- -------- -------- --------
NET INCOME FROM CONTINUING
OPERATIONS 2,813 1,316 5,088 2,413
DISCONTINUED OPERATIONS
(Loss) income from operations of
discontinued divisions - net (1,624) 967 (2,458) 51
--------- -------- -------- --------
(LOSS) GAIN ON DISCONTINUED
OPERATIONS (1,624) 967 (2,458) 51
--------- -------- -------- --------
NET INCOME $1,189 $2,283 $2,630 $2,464
========= ======== ======== ========
NET INCOME PER COMMON SHARE:
Income from continuing
operations
Basic $0.14 $0.07 $0.25 $0.12
========= ======== ======== ========
Diluted $0.13 $0.07 $0.23 $0.12
========= ======== ======== ========
(Loss) gain on discontinued
operations
Basic and diluted $(0.08) $0.05 $(0.12) $0.00
========= ======== ======== ========
Diluted $(0.07) $0.05 $(0.11) $0.00
========= ======== ======== ========
NET INCOME PER SHARE:
Basic $0.06 $0.12 $0.13 $0.13
========= ======== ======== ========
Diluted $0.05 $0.11 $0.12 $0.12
========= ======== ======== ========
NUMBER OF SHARES USED IN PER
SHARE CALCULATIONS:
Basic 20,399 19,476 20,358 19,451
========= ======== ======== ========
Diluted 21,907 19,910 21,873 19,909
========= ======== ======== ========
CLAXSON
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of U.S. dollars)
Six Months Ended
June 30,
-------------------
2005 2004
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,630 $2,464
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Amortization of programming rights 1,468 742
Share-based compensation 28 33
Depreciation and amortization 1,926 2,345
Accrued and unpaid interest (51) 56
Exchange rate (gain) (1,095) 343
Net (gain) on disposal of assets (1,207) (336)
(Income) loss from unconsolidated affiliates 1,597 (876)
Minority interest (236) (3)
Changes in operating assets and liabilities 1,732 (3,924)
--------- ---------
Net cash provided by operating activities 6,792 844
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (1,023) (756)
Transaction costs paid - (1,152)
Distributions to minority owners of
unconsolidated subsidiaries - (380)
Investment in (distributions from) unconsolidated
affiliates (22) 247
Redemption of deposit for the sale of subsidiary (506) -
Restricted cash received from sale of subsidiary 1,000 -
Restricted cash released in guarantee of Chilean
syndicated loan - 907
Proceeds from sale of investments in subsidiaries
and affiliates 11,088 625
--------- ---------
Net cash provided by (used in) investing
activities 10,537 (509)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of short/long-term debt (3,627) (2,638)
Proceeds from excersized stock options 114 52
--------- ---------
Net cash (used in) financing activities (3,513) (2,586)
--------- ---------
EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH
AND CASH EQUIVALENTS (21) (46)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 13,795 (2,297)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,270 7,677
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $21,065 $5,380
========= =========
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