Claxson Reports 2006 Fourth Quarter and Annual Financial Results.Company Recently Announced the Formation of a Special Committee of Independent Directors to Evaluate a Going Private Proposal BUENOS AIRES Buenos Aires (bwā`nəs ī`rēz, âr`ēz, Span. bwā`nōs ī`rās), city and federal district (1991 pop. , Argentina -- Claxson Interactive Group Inc. (Pink Sheets:XSONF) "Claxson" or the "Company"), today announced financial results for the three and twelve-month periods ended December 31, 2006. As previously announced, in December 2006 the Company executed agreements for the sale of the majority of its Pay TV division and Broadcast Radio divisions with Turner and Prisa, respectively, and in accordance with applicable accounting principles, the assets, liabilities and operations of these two operations 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. Also as previously announced, management has made a proposal to take the Company private at a price of $10.50 per share. Claxson's board of directors has formed a special committee to evaluate and negotiate this proposal and other strategic alternatives. Financial Highlights Fourth Quarter 2006 Net revenue for the fourth quarter of 2006 was $6.7 million, a 23% increase from net revenue of $5.4 million for the fourth quarter of 2005. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the three months ended December 31, 2006 were $7.5 million, an 8% decrease from the $8.1 million for the fourth quarter of 2005. 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. was $0.8 million for the three-month period ended December 31, 2006 compared to $2.7 million for the three-month period ended December 31, 2005. Foreign currency exchange gain for the three-month period ended December 31, 2006 was $0.1 million compared to a foreign exchange loss of $0.1 million for the three-month period ended December 31, 2005. 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 December 31, 2006 was $0.2 million ($0.01 per common and diluted share), compared to a net loss of $2.5 million ($0.12 per common and $0.11 per diluted share) for the same period in 2005. Net income for the three months ended December 31, 2006 was $4.7 million ($0.22 per common and $0.21 per diluted share), compared to $0.1 million ($0.01 per common and diluted share) for the same period in 2005. Fiscal Year 2006 Net revenue for the twelve-month period ended December 31, 2006 was $24.7 million, a 22% increase compared to $20.2 million for the same period in 2005. Operating expenses for the twelve-month period ended December 31, 2006 were $29.3 million, a 6% increase compared to $27.7 million in the same period of 2005. Operating loss was $4.6 million for the twelve-month period ended December 31, 2006 compared to $7.4 million for the same period in 2005. Foreign currency exchange loss for the twelve-month period ended December 31, 2006 was $0.1 million, a $0.7 million difference with the $0.6 million foreign currency exchange gain for the same period of 2005. Net loss from continuing operations for the twelve-month period ended December 31, 2006 was $3.9 million ($0.19 per common and $0.18 per diluted share), versus $8.0 million ($0.39 per common and $0.36 per diluted share) for the same period in 2005. Net income for the twelve-month period ended December 31, 2006 was $13.0 million ($0.62 per common and $0.59 per diluted share), versus $6.2 million ($0.31 per common and $0.28 per diluted share) for the same period in 2005. [TABLE OMITTED] "While we advance in the regulatory approval process for the Pay TV and Radio sale transactions management, with the support of a group of controlling shareholders, has made a proposal to take the Company private," said Roberto 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. . "Given the smaller anticipated operating size of Claxson and the increase of public company costs it is difficult for a company like Claxson to continue to operate as a reporting company." The financial results of operations of Pay TV only include the Playboy TV Playboy TV is a pay-per-view adult television channel on cable and satellite services, and available in Brazil, United States, Canada, New Zealand, the United Kingdom, Spain, Ireland and Norway. The channel is owned by Playboy Enterprises. Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. joint venture as well as the operation of our technical facility in Miami which are not part of the discontinued operations. Pay TV Net revenue for the fourth quarter of 2006 was $6.4 million, a 19% increase from net revenue of $5.3 million for the fourth quarter of 2005. The increase in net revenue is principally attributable to an increase in subscriber-based fees and to a lesser extent to the development of the Mobile business for our Pay TV content. Net revenue for the twelve-month period ended December 31, 2006 was $23.7 million compared to $19.8 million for the same period of 2005. The increase in net revenue is principally attributable to an increase in subscriber-based fees and to a lesser extent to an increase in sales in Mobile platforms. 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. (before depreciation and amortization) for the fourth quarter of 2006 was $6.6 million compared to $6.2 million for the same period in 2005. The increase is principally attributable to higher programming expenditures as a result of increased original productions. Operating expenses (before depreciation and amortization) for the twelve-month period ended December 31, 2006 were $24.4 million compared to $22.3 million for the same period of 2005 primarily as a result of higher programming expenditures. Operating loss for the fourth quarter of 2006 was $0.3 million compared to operating loss of $1.1 million for the same period in 2005. Operating loss for the twelve-month period ended December 31, 2006 was $1.3 million compared to $3.2 million for the same period of 2005. Broadband & Internet Net revenue for the fourth quarter of 2006 increased to $0.3 million from $0.1 million for the fourth quarter of 2005. Net revenue for the twelve-month period ended December 31, 2006 was $0.7 million compared to $0.1 million for the same period of 2005. The increase in revenue is a result of the addition of new clients. Operating expenses (before depreciation and amortization) for the fourth quarter of 2006 represented a reversal of $0.4 million compared to an expense of $0.6 million. The reversal represents the forfeiture The involuntary relinquishment of money or property without compensation as a consequence of a breach or nonperformance of some legal obligation or the commission of a crime. The loss of a corporate charter or franchise as a result of illegality, malfeasance, or Nonfeasance. and favorable outcome of a tax claim in Brazil. Operating expense (before depreciation and amortization) for the twelve-month period ended December 31, 2006 was $0.3 million, compared to $0.7 million for the same period of 2005, primarily as a result of the reversal of the Brazilian tax claim expense. 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. for the fourth quarter of 2006 was $0.6 million compared to a $0.6 million loss for the same period in 2005. Operating income for the twelve-month period ended December 31, 2006 was $0.1 million, compared to an operating loss of $0.6 million for the same period of 2005. Liquidity As of December 31, 2006, Claxson had cash and cash equivalents of $14.2 million (excluding $5.9 million in cash at companies subject to the sale transactions) and financial debt of $39.3 million including principal and accrued but unpaid interest. In addition, future interest payments on the Company's 8.75% Senior Notes due in 2010, totaling $9.4 million as of December 31, 2006, are recorded as debt. For the twelve-month period ended December 31, 2006, Claxson's operating activities (including the discontinued operations) generated cash flows of $12.5 million compared to $16.7 million for the same period of 2005. The difference is primarily due to a slower collection process as compared to 2005. Cash generated from operating activities was primarily used for the payment of debt obligations, for capital expenditures and investments. About Claxson Claxson (Pink Sheets:XSONF) 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 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 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, Chile, Brazil, Spain and Portugal. 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 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 September 27, 2006. 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