TV Azteca Second Quarter EBITDA Up 7% to a Record of Ps.1,036 Million (US$96 Million)

TV Azteca Second Quarter EBITDA Up 7% to a Record of Ps.1,036 Million (US$96 Million)

-EBITDA Margin of 47%

-7% Increase in Net Sales, to All-Time High for a 2Q

-Net Income Grows 8% to Ps.497 million (US$46 million)

MEXICO CITY, July 19 /PRNewswire-FirstCall/ -- TV Azteca, S.A. de C.V. (BMV: TVAZTCA) (Latibex: XTZA), one of the two largest producers of Spanish- language television programming in the world, announced today all-time high second quarter net sales of Ps.2,201 million (US$203 million), up 7% from the same period of 2004. Second quarter EBITDA was Ps.1,036 million (US$96 million), 7% above the same period a year ago, and a six-year record high for a second quarter. EBITDA margin for the quarter was 47%, the same as the prior-year period.

"Our compelling programming grids, complemented this quarter by TV Azteca's smash musical-reality show La Academia 4th Generation, were optimal vehicles to build fitting advertising campaigns," said Mario San Roman, Chief Executive Officer of TV Azteca. "As a result, revenue firmly expanded to record-high levels, and we managed to preserve our strong profitability standards."

"On the strategic front, we made further progress on our cash-usage plan, with distributions of US$59 million during the quarter, while shareholders approved another payment of approximately US$21 million to be made on December 1," added Mr. San Roman.

As has been detailed, the company's plan for uses of cash entails distributions of over US$500 million and reductions in TV Azteca's debt by approximately US$250 million within a six-year period that started in 2003.

Second Quarter Results

Net sales grew 7% to a record high of Ps.2,201 million (US$203 million), up from Ps.2,056 million (US$190 million) for the same quarter of 2004.

Total costs and expenses rose 7% to Ps.1,165 million (US$107 million), from Ps.1,086 million (US$100 million) in the same period last year. As a result, the company reported EBITDA of Ps.1,036 million (US$96 million), 7% above Ps.970 million (US$89 million) for the second quarter of 2004. Net income was Ps.497 million (US$46 million), 8% higher than Ps.462 million (US$43 million) in the same period of 2004.

Millions of pesos(1) and dollars(2) except percentages and per share amounts.

2Q 2004 2Q 2005 Change
US$ %
Net Sales
Pesos Ps. 2,056 Ps. 2,201
US$ US$ 190 US$ 203 13 +7%
EBITDA(3)
Pesos Ps. 970 Ps. 1,036
US$ US$ 89 US$ 96 6 +7%
Net Income
Pesos Ps. 462 Ps. 497
US$ US$ 43 US$ 46 3 +8%
Income per CPO(4)
Pesos Ps. 0.155 Ps. 0.167
US$ US$ 0.014 US$ 0.015 0.001 +8%

(1) Pesos of constant purchasing power as of June 30, 2005.

(2) Conversion based on the exchange rate of Ps.10.84 per U.S. dollar as of June 30, 2005.

(3) EBITDA is Operating Profit Before Depreciation and Amortization under Mexican GAAP.

(4) Calculated based on 2,973 million CPOs outstanding as of June 30, 2005.

Net Sales

"Top-quality audiences were thrilled by our appealing content this quarter, and advertisers were eager to reach their most sought-after viewers through our shows, both in Mexico and the U.S.," said Mr. San Roman. "Ad options closely aligned with the clients' marketing needs effectively satisfied the demand for our programming, resulting in continued sales growth."

Second quarter revenue includes sales from Azteca America -- the company's wholly owned broadcasting network focused on the U.S. Hispanic market -- of Ps.107 million (US$10 million), an 8% increase from Ps.99 million (US$9 million) for the same period a year ago. Azteca America revenue this quarter was comprised of Ps.59 million (US$5 million) in sales from the Los Angeles station KAZA-TV, and Ps.48 million (US$4 million) from network sales.

TV Azteca also reported sales of programming to other countries of Ps.34 million (US$3 million), compared with Ps.49 million (US$5 million) in the same period a year ago. This quarter's programming exports were driven by the company's novelas Cuando Seas Mia and La Hija del Jardinero sold primarily in Asian markets.

TV Azteca reported Ps.32 million (US$3 million) in advertising sales to Unefon, compared with Ps.33 million (US$3 million) in the second quarter of 2004. In accordance with the terms of the advertising agreement between Unefon and TV Azteca, during the second quarter, Unefon paid TV Azteca in cash the Ps.33 million (US$3 million) of advertising purchases placed within the prior three-month period.

TV Azteca did not report sales to Todito.com this quarter, whereas in the second quarter of 2004, content and advertising sales to Todito.com were Ps.47 million (US$4 million). As was previously detailed, the first quarter of 2005 marked the end of a five-year service contract through which TV Azteca acquired 50% of Todito.com.

During the second quarter of 2005, TV Azteca's board approved a new agreement that divided Grupo Todito into two independent companies, which resulted in TV Azteca controlling 100% of Todito.com network sites, named Azteca Web. The remainder of the assets of Grupo Todito will be 100% controlled by Universidad CNCI, a related party as disclosed on the company's public filings. TV Azteca expects to begin consolidation of the operations of Azteca Web in the third quarter of 2005.

Barter sales were Ps.68 million (US$6 million), compared with Ps.69 million (US$6 million) in the same period of last year. Inflation adjustment of advertising advances was Ps.38 million (US$4 million), compared with Ps.75 million (US$7 million) for the second quarter of 2004.

Costs and Expenses

The 7% increase in second quarter costs and expenses resulted from the combined effect of an 8% rise in programming, production and transmission costs to Ps.883 million (US$81 million), from Ps.814 million (US$75 million) in the prior-year period, and a 4% increase in administration and selling expense to Ps.282 million (US$26 million), from Ps.272 million (US$25 million) in the same quarter a year ago.

"Incremental outlays resulting from enhanced programming efforts in the quarter were compensated by top line expansion, with a positive outcome for EBITDA," said Carlos Hesles, Chief Financial Officer of TV Azteca. "We carefully managed costs and expenses to generate optimal return from our shows, while effectively capturing market opportunities."

Consistent with increased production efforts this quarter, TV Azteca generated 2,242 hours of in-house content, 4% above the 2,146 hours produced in the year-ago period.

The 4% increase in administration and selling expense primarily reflects the company's increased operations in Mexico and in the U.S. Hispanic market.

EBITDA and Net Income

The increase in second quarter net sales, combined with the growth in costs and expenses, resulted in EBITDA of Ps.1,036 million (US$96 million), up 7% from Ps.970 million (US$89 million) a year ago. The EBITDA margin this quarter was 47%.

Below EBITDA, the company recorded depreciation and amortization of Ps.108 million (US$10 million) from Ps.109 million (US$10 million) a year ago, reflecting a stable balance of fixed assets among the quarters.

The company recorded other expense of Ps.139 million (US$13 million), compared with Ps.134 million (US$12 million) a year ago. Other expense for the quarter was primarily comprised of charitable donations of Ps.54 million (US$5 million), legal fees of Ps.51 million (US$5 million), the recognition of 50% of the net loss of Todito.com of Ps.11 million (US$1 million), the recognition of the results from Monarcas -- TV Azteca's soccer team -- of Ps.8 million (US$1 million), pre-operating expenses of Azteca America of Ps.8 million (US$1 million), and other items of Ps.7 million (US$1 million).

Net comprehensive financing cost during the quarter was Ps.255 million (US$24 million), compared with Ps.204 million (US$19 million) a year ago.

There was a Ps.16 million (US$1 million) increase in interest expense primarily resulting from a higher level of debt with cost this quarter.

Additionally, interest income decreased Ps.24 million (US$2 million) due to a reduction in the company's cash balance. Foreign exchange loss increased Ps.16 million (US$1 million), reflecting the company's net asset U.S. dollar monetary position together with a 4% revaluation of the peso this quarter.

Provision for income tax was Ps.37 million (US$3 million), compared with Ps.60 million (US$6 million) in the same period of the prior year, primarily resulting from higher fiscal losses from subsidiaries this quarter.

Net income was Ps.497 million (US$46 million), up 8% from Ps.462 million (US$43 million) for the same period of 2004.

Azteca America With National Network Status

During the quarter, Azteca America Network announced that recent carriage agreements with Comcast, Cox, Time Warner, Echostar and DirecTV in key markets strengthened its affiliate distribution, which now stands at 39 markets, 30 of them with pay TV coverage.

The markets covered are home to 77% of the total U.S. Hispanic population, and represent Nielsen Coverage of approximately 70%, giving Azteca America official national network status. The company expects the enhanced coverage to result in increased sales of its advertising airtime among U.S. national network clients.

"First we built a network and now we are building a ratings and sales story, one page at a time," said Luis J. Echarte, President and CEO of Azteca America. "During the quarter, we had some ratings successes that beat out leading programming from Telemundo and Telefutura on several occasions.

"Leveraging our coverage with excellent upcoming content, we expect to close this year's upfront season with over 140 clients, almost twice the base from our previous upfront."

Uses of Cash

As was previously announced, TV Azteca's Annual Ordinary Shareholders' Meeting held on April 29 approved distributions for an aggregate amount of approximately US$80 million to be paid during 2005, under the company's cash- usage plan. US$59 million were paid on June 9, and another payment of approximately US$21 million is scheduled to be made on December 1.

The distributions under the cash plan made to date represent an aggregate amount of US$384 million, equivalent to a 24% yield on the July 18, 2005, CPO closing price. Prior distributions include: US$125 million on June 30, 2003; US$15 million on December 5, 2003; US$33 million on May 13, 2004; US$22 million on November 11, 2004; and US$130 million on December 14, 2004.

Debt Outstanding

As of June 30, 2005, the company's total outstanding debt was Ps.7,138 million (US$659 million). TV Azteca's cash balance was Ps.1,019 million (US$94 million), resulting in net debt of Ps.6,119 million (US$565 million).

The total debt to last twelve months (LTM) EBITDA ratio was 1.9 times, and net debt to EBITDA was 1.6 times. LTM EBITDA to net interest expense ratio was 5.6 times.

Excluding -- for analytical purposes -- Ps.1,298 million (US$120 million) debt due 2069, total debt was Ps.5,840 million (US$539 million), and total debt to EBITDA ratio was 1.6 times.

First Half Results

Millions of pesos(1) and dollars(2) except percentages and per share amounts.

1H 2004 1H 2005 Change
US$ %
Net Sales
Pesos Ps. 3,663 Ps. 3,868
US$ US$ 338 US$ 357 19 +6%
EBITDA(3)
Pesos Ps. 1,598 Ps. 1,666
US$ US$ 147 US$ 154 7 +4%
Net Income
Pesos Ps. 654 Ps. 700
US$ US$ 60 US$ 65 4 +7%
Income per CPO(4)
Pesos Ps. 0.220 Ps. 0.235
US$ US$ 0.020 US$ 0.022 0.002 +7%

(1) Pesos of constant purchasing power as of June 30, 2005.

(2) Conversion based on the exchange rate of Ps.10.84 per U.S. dollar as of June 30, 2005.

(3) EBITDA is Operating Profit Before Depreciation and Amortization under Mexican GAAP.

(4) Calculated based on 2,973 million CPOs outstanding as of June 30, 2005.

Company Profile

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 U.S. 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 U.S. Securities and Exchange Commission.

Investor Relations:
Bruno Rangel Rolando Villarreal
+ 52 (55) 1720 9167 + 52 (55) 1720 0041
jrangelk@tvazteca.com.mxrvillarreal@gruposalinas.com.mx

Press Relations:
Tristan Canales Daniel McCosh
+ 52 (55) 1720 1441 + 52 (55) 1720 0059
tcanales@gruposalinas.com.mxdmccosh@tvazteca.com.mx

Source: TV Azteca, S.A. de C.V.

CONTACT: Investor Relations, Bruno Rangel, +011-52-55-1720-9167, or
jrangelk@tvazteca.com.mx, or Rolando Villarreal, +011-52-55-1720-0041, or
rvillarreal@gruposalinas.com.mx, or Press Relations, Tristan Canales,
+011-52-55-1720-1441, or tcanales@gruposalinas.com.mx, or Daniel McCosh,
+011-52-55-1720-0059, or dmccosh@tvazteca.com.mx, all for TV Azteca

Web site: http://www.tvazteca.com.mx/

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