TV Azteca Announces 4Q05 EBITDA Growth of 8% to Ps.1,244 Million (US$116 Million)

TV Azteca Announces 4Q05 EBITDA Growth of 8% to Ps.1,244 Million (US$116 Million)

51% EBITDA Margin for the Quarter

Record EBITDA for Full-Year 2005 of Ps.3,844 Million (US$359 Million), With 45% Margin

MEXICO CITY, Feb. 22 /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 a 3% reduction in net sales during the quarter to Ps.2,437 million (US$227 million), and 8% growth in EBITDA to Ps. 1,244 million (US$116 million). Fourth quarter EBITDA margin increased five percentage points to 51%.

Net sales for the full year decreased 1% to Ps.8,534 million (US$797 million) and EBITDA grew 1% to a record level of Ps.3,844 million (US$359 million). EBITDA margin for the year was 45%, above the 44% reported in 2004.

"Our 2005 results mark the seventh year of continued expansion in EBITDA, reaching an all-time high level with notable profitability," said Mario San Roman, Chief Executive Officer of TV Azteca. "In a year without revenue from extraordinary events, the positive EBITDA performance reveals the company's solid strategy to effectively control costs and expenses.

"From a strategic perspective, we made further progress with our six-year plan for uses of cash, including distributions of US$80 million in 2005; and we have reached an aggregate amount of US$405 million in disbursements since June 2003," added Mr. San Roman. "For 2006, TV Azteca shareholders approved cash distributions for another US$88 million, in strict adherence to the plan."

As previously announced, 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.

Fourth Quarter Results

Net sales decreased 3% to Ps.2,437 million (US$227 million), from Ps.2,512 million (US$235 million) for the fourth quarter 2004. Total costs and expenses declined 12% to Ps.1,193 million (US$111 million), from Ps.1,360 million (US$127 million) for the same period last year. As a result, the company reported EBITDA of Ps.1,244 million (US$116 million), compared with Ps.1,152 million (US$108 million) in the fourth quarter 2004. Net income for majority shareholders was Ps.89 million (US$8 million), compared with net income of Ps.496 million (US$46 million) for the same period 2004.

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

4Q 2004 4Q 2005 Change
US$ %
Net Sales
Pesos Ps. 2,512 Ps. 2,437
US$ US$ 235 US$ 227 (7) -3%
EBITDA(3)
Pesos Ps. 1,152 Ps. 1,244
US$ US$ 108 US$ 116 9 +8%
Net Income for
Majority Shareholders
Pesos Ps. 496 Ps. 89
US$ US$ 46 US$ 8 (38) -82%
Net Income for Majority
Shareholders per CPO(4)
Pesos Ps. 0.17 Ps. 0.03
US$ US$ 0.016 US$ 0.003 (0.013) -82%

(1) Pesos of constant purchasing power as of December 31, 2005.
(2) Conversion based on the exchange rate of Ps.10.71 per U.S. dollar as
of December 31, 2005.
(3) EBITDA is Profit Before Depreciation and Amortization under
Mexican GAAP.
(4) Calculated based on 2,987 million CPOs outstanding as of
December 31, 2005.

Net Sales

"The performance of our domestic cash sales was consistent with solid programming grids, which gained a 40% share of commercial audience for the full day in Mexico," added Mr. San Roman. "However, lower non-cash revenues, especially from Grupo Todito, partially offset our dynamic performance."

In addition, fourth quarter net 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), compared with Ps.149 million (US$14 million) for the same period a year ago. Azteca America revenue for the quarter included Ps.52 million (US$5 million) in sales from the Los Angeles station KAZA-TV, and Ps.55 million (US$5 million) from network sales. Last year Azteca America recorded revenue related to the transmission of extraordinary sports events, which were not present this period.

TV Azteca also reported sales of programming to other countries of Ps.22 million (US$2 million), compared with Ps.17 million (US$2 million) for the fourth quarter 2004. This quarter's programming exports were primarily driven by the company's novelas "La Vida es Una Cancion" and "Lo Que Callamos las Mujeres," sold in Latin American markets, as well as "La Hija del Jardinero" and "Cuando Seas Mia" sold primarily in Latin American and European markets.

During the quarter, TV Azteca did not report material advertising and content sales to Azteca Web, a company through which TV Azteca controls 100% of the Grupo Todito site network. In the fourth quarter 2004, content and advertising sales to Todito.com were Ps.61 million (US$6 million).

As was previously announced, the first quarter of 2005 marked the end of a five-year service contract through which TV Azteca acquired 50% of Todito.com in exchange for content, advertising and sales support. During the second quarter, TV Azteca's board approved a new agreement that divided Grupo Todito into two independent companies, which resulted in TV Azteca controlling 100% of the Grupo Todito site network, named Azteca Web. During the fourth quarter, TV Azteca legally formalized such division.

Barter sales were Ps.110 million (US$10 million), compared with Ps.120 million (US$11 million) in the same period last year. Inflation adjustment of advertising advances was Ps.41 million (US$4 million), compared with Ps.91 million (US$9 million) for the fourth quarter 2004.

Costs and Expenses

The 12% decline in costs and expenses resulted from the combined reduction of 8% in programming, production and transmission costs to Ps.933 million (US$87 million), from Ps.1,011 million (US$94 million) during the same period 2004, and a 25% decrease in administration and selling expense to

Ps.260 million (US$24 million), from Ps.349 million (US$33 million) in the same quarter 2004.

"We were successful in tapping the high seasonal domestic demand for advertising, while further expanding profitability, thanks to a strict discipline in production budgeting and close scrutiny of costs on all fronts," said Carlos Hesles, Chief Financial Officer of TV Azteca.

The 25% reduction in administration and selling expense results from lower personnel, operating, services and travel expenses in the quarter. It also reflects a reduction of approximately Ps.46 million (US$4 million) in advisory fees related to compliance with U.S. securities laws.

EBITDA and Net Income

The 3% decrease in fourth quarter net sales, combined with the 12% reduction in costs and expenses, resulted in EBITDA of Ps.1,244 million (US$116 million), compared with Ps.1,152 million (US$108 million) a year ago. The EBITDA margin was 51%, compared with 46% in the same period of 2004.

Below EBITDA, the company recorded depreciation and amortization of Ps.63 million (US$6 million) from Ps.97 million (US$9 million) a year ago, reflecting a Ps.34 million (US$3 million) decrease in the amortization account of the company, due to the adoption of accounting bulletin B-7. The bulletin allows making impairment tests in the company's goodwill, instead of periodic amortizations. At the end of 2005, the goodwill of TV Azteca and its subsidiaries did not show signs of impairment.

The company recorded other expenses of Ps.185 million (US$17 million), compared with Ps.259 million (US$24 million) a year ago. The reduction in other expenses in the quarter was influenced by the recognition of lower losses from Monarcas -- TV Azteca's soccer team -- and a decrease in losses from the sale of fixed assets.

Net comprehensive financing cost during the quarter was Ps.240 million (US$22 million), compared with Ps.222 million (US$21 million) a year ago. There was a Ps.6 million (US$1 million) reduction in interest expense due to lower interest rates in the company's debt with cost. Other financial cost decreased Ps.41 million (US$4 million), due to the 2004 cancellation of deferred expenses from the issuance of TV Azteca's US$300 million Note due 2007, which was prepaid. Interest income decreased Ps.27 million (US$3 million), as a result of a reduction in the average cash balance of the company in the quarter. There was a Ps.26 million (US$2 million) loss in monetary position, compared with a Ps.18 million (US$2 million) gain in the same period 2004. The loss in monetary position this quarter reflects a net asset monetary position in U.S. dollars, together with a 1% exchange rate appreciation. The loss in monetary position decreased Ps.7 million (US$1 million), primarily due to lower inflation.

The provision for income tax was Ps.147 million (US$14 million), compared with Ps.77 million (US$7 million) in the same period 2004, reflecting fiscal losses from subsidiaries during the quarter.

The company recorded a non-recurring long-term assets impairment of Ps.468 million (US$44 million), as a result of the application of accounting bulletin C-15 on Grupo Todito's goodwill.

Fourth quarter's net income was Ps.89 million (US$8 million), compared with Ps.496 million (US$46 million) for the same period of 2004. On a pro- forma basis, excluding the non-recurring impairment of long term assets, net income for the quarter was up 12% to Ps.557 million (US$52 million).

Azteca America Update

Late in 2005, Azteca America was officially recognized by Nielsen as a network with national coverage in the U.S., which increases Azteca America's possibilities to attract advertisers and generate enhanced sales volume during 2006 and beyond.

In addition, during the quarter Azteca America announced that it signed an affiliation agreement with Comcast -- a leading provider of cable, entertainment and communications products and services in the U.S. -- which provides for carriage opportunities for the network's signal in U.S. Hispanic markets not covered by over-the-air stations.

According to the contract, Comcast systems across Hispanic markets in the U.S., without a local terrestrial signal of Azteca America affiliates, may elect to add the Network's programming to their line-up, strengthening the national coverage of Azteca America.

Also, in January 2006, the company announced that Alta Communications -- a leading U.S. private equity firm for investments in communications -- made an investment in Una Vez Mas, Azteca America's largest affiliate group. Subject to FCC approval, the investment will allow Una Vez Mas, among other things, to acquire additional stations in 11 Hispanic areas, including three major markets.

Azteca America expects that the addition will increase the number of affiliate stations to 54 from 43 at the close of 2005, and to have its signal available in markets that are home to 87% of U.S. Hispanics, 7 percentage points above the figure at the end of 2004.

Uses of Cash

As was previously announced, during 2005 there were US$80 million in cash distributions to shareholders, in line with the company's plan for uses of cash.

The disbursements under the cash plan made to date, represent an aggregate amount of US$405 million, equivalent to a 20% yield on the February 20, 2006, CPO closing price.

The distributions made to date consist of the following amounts: US$125 million paid 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; US$130 million on December 14, 2004; US$59 million on June 9, 2005; and US$21 million on December 1, 2005. Disbursements have implied a reduction in the company's shareholders equity.

The shareholders' meeting held on February 20, 2006, approved distributions for US$88 million to be paid during 2006. A payment of US$66 million is scheduled to be made on May 23, and another of US$22 million on November 22.

Debt Outstanding

As of December 31, 2005, the company's total outstanding debt was Ps.7,293 million (US$681 million). TV Azteca's cash balance was Ps.1,342 million (US$125 million), resulting in net debt of Ps.5,951 million (US$556 million). The total debt to last twelve months (LTM) EBITDA ratio was 1.9 times, and net debt to EBITDA was 1.5 times. LTM EBITDA to net interest expense ratio was 5 times.

Excluding -- for analytical purposes -- Ps.1,283 million (US$120 million) debt due 2069, total debt was Ps.6,010 million (US$561 million), and total debt to EBITDA ratio was 1.6 times.

As was previously announced on December 16, 2005, TV Azteca successful issued Structured Securities Certificates of Ps.1,000 million, with gradual maturities ending 2012, at TIIE + 173 basis points. With the issuance, TV Azteca expects to amortize loans for an amount of approximately Ps.1,000 million, at higher cost with certain financial institutions.

Twelve-Month Results

For the full year 2005, net sales decreased 1% to Ps.8,534 million (US$797 million), from Ps.8,598 million (US$803 million) in 2004. Total cost and expenses declined 3% to Ps.4,690 million (US$438 million), compared with Ps.4,811 million (US$449 million) in 2004. As a result, the company reported EBITDA of Ps.3,844 million (US$359 million), a 1% increase to Ps.3,787 million (US$354 million) from the previous year. On a pro forma basis, excluding Ps.268 million (US$25 million) of revenues and Ps.149 million (US$14 million) of costs registered in the previous year related to the transmission of the 2004 Summer Olympic Games, net sales increased 2% and EBITDA grew 5%.

Net income for majority shareholders was Ps.1,216 million (US$114 million), compared with Ps.1,596 million (US$149 million) in 2004. On a pro-forma basis, excluding Ps.468 million (US$44 million) of non-recurring impairment of long term assets recorded in 2005, full year net income grew 6% to Ps.1,684 million (US$157 million).

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

2004 2005 Change
US$ %
Net Sales
Pesos Ps. 8,598 Ps. 8,534
US$ US$ 803 US$ 797 (6) -1%
EBITDA(3)
Pesos Ps. 3,787 Ps. 3,844
US$ US$ 354 US$ 359 6 +1%
Net Income for
Majority Shareholders
Pesos Ps. 1,596 Ps. 1,216
US$ US$ 149 US$ 114 (35) -24%
Net Income for Majority
Shareholders per CPO(4)
Pesos Ps. 0.53 Ps. 0.41
US$ US$ 0.05 US$ 0.04 (0.01) -24%

(1) Pesos of constant purchasing power as of December 31, 2005.
(2) Conversion based on the exchange rate of Ps.10.71 per U.S. dollar as
of December 31, 2005.
(3) EBITDA is Profit Before Depreciation and Amortization under
Mexican GAAP.
(4) Calculated based on 2,987 million CPOs outstanding as of
December 31, 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, 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 filings with securities authorities.

Investor Relations:
Bruno Rangel
+011-52-55-1720-9167
jrangelk@tvazteca.com.mx

Rolando Villarreal
+011-52-55-1720-0041
rvillarreal@gruposalinas.com.mx

Press Relations:
Tristan Canales
+011-52-55-1720-1441
tcanales@gruposalinas.com.mx

Daniel McCosh
+011-52-55-1720-0059
dmccosh@tvazteca.com.mx

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

CONTACT: Investors, 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 Media, 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 of TV Azteca

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

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