[LOGO - SKY}
FOR IMMEDIATE RELEASE
- ---------------------
INNOVA, S. DE R.L. DE C.V.
REPORTS FIRST QUARTER 2003 RESULTS
- SUBSCRIBER BASE GROWS TO 779,700 -
- EBITDA INCREASED 20.4% TO PS. 260 MM-
- EBITDA MARGIN INCREASED 17.9% TO 29.6% -
- SHAREHOLDER FUNDING WAS NOT REQUIRED DURING THE LAST FOUR QUARTERS -
o The number of gross active SUBSCRIBERS increased 11.2% to 779,700 as
of March 31, 2003 as compared to the first quarter of the previous
year.
o REVENUES increased 2.1% due to the increase in our subscriber base.
o EBITDA for the first quarter of 2003 increased 20.4% to Ps. 260.5
million from Ps. 216.3 million for the same period of the prior year.
As a result, EBITDA margin increased 17.9% from 25.1% to 29.6%.
o EBIT for the first quarter of 2003 improved Ps. 91.3 million to a
positive Ps. 60.1 million from Ps. (31.2) million for the same period
of the prior year. As a result, EBIT margin substantially increased
from a negative 3.6% to a positive 6.8%.
o Sky did not require additional FUNDING from its shareholders during
the last four quarters.
o Sky continues to offer the highest quality CONTENT in the Mexican pay
TV industry.
Mexico City, April 28, 2003. INNOVA, S. DE R.L. DE C.V., the provider of
direct-to-home (DTH) satellite television services under the SKY brand name
and the pay-TV market leader in Mexico as measured by the number of
subscribers, announced its unaudited consolidated results for the first
quarter ended March 31, 2003. The attached results have been prepared in
accordance with Mexican GAAP and restated to constant Mexican pesos as of
March 31, 2003.
SUBSCRIBER BASE The number of gross active subscribers increased to
- --------------- 779,700 as of March 31, 2003; this represents an 11.2%
increase from 701,300 as of March 31, 2002 or
approximately 78,400 gross active subscribers.
We believe the increase in the subscriber base was
primarily due to:
1. An increase in customer activations in
response to the high quality of our
programming content, special programming and
aggressive marketing campaigns and,
2. Our decision to recognize commercial
subscribers (non residential subscribers such
as hotels, bars, restaurants and other
businesses) in our gross active subscriber
base.
As of March 31, 2003 we had approximately
41,400 commercial subscribers, as compared to
approximately 25,400 as of March 31, 2002
which were not previously included as part of
our subscriber base.
In the past, we were not focused on
commercial subscribers; however as the number
of commercial subscribers has grown we
believe it has become a relevant number in
our subscriber base, and therefore we have
decided to include during this quarter and
going forward, all of our non-residential
subscribers as part of the total subscriber
base.
We believe the main factor causing subscriber
cancellations during this quarter, as with last
quarter, was the continuing weakness in the Mexican
economy. Nevertheless, we experienced a decrease in the
rate of subscriber cancellations as compared to
previous quarters.
2
PROGRAMMING During the first quarter of 2003, Sky continued to
CONTENT enhance its programming content, by adding the
- ------- following offerings:
o The pay TV-exclusive broadcast of certain soccer
matches of the Mexican 2003 Closing Soccer
Tournament;
o The pay TV-exclusive broadcast of certain soccer
matches of the "Copa Libertadores" Soccer
Tournament;
o Exclusive pay TV transmission of the 2002-2003
Mexican bullfight season;
o The launching of "W Radio" channel, a news and
entertainment radio programs channel on a pay
TV-exclusive basis, conducted by well-known
Mexican journalists;
o Big Brother II, a 24-hour-a-day live reality show
(on a pay TV-exclusive basis);
o Boxing matches and special events such as the 2003
Brazilian Carnival;
o Exclusive transmission of the Ultimate Fighting
Championship;
o LPGA, US PGA and US Senior PGA Golf Tournaments;
and
o Exclusive pay TV live transmission of certain
matches of the Mexican Baseball league.
PRICE AND Innova's current installation fee is Ps. 1,099. However,
PROMOTIONS subscribers who agree to pay the monthly programming
- ---------- fee via direct debit to a credit card, pay only Ps. 99.
We continue to improve our subscriber base quality, by
among other things, encouraging new and current
subscribers to pay their monthly programming services
through direct debit to a credit card.
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FINANCIAL REVIEW
- ----------------
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
MILLION OF CONSTANT MEXICAN PESOS AS OF MARCH 31, 2003
THREE MONTHS ENDED MARCH 31,
-------------------------------------------
2003 % Margin 2002 % Margin VAR %
Net Revenues 880 100 863 100 17 2
Cost of Sales 283 32 271 31 12 4
----- ----- -----
Gross Profit 597 68 592 69 5 1
Selling 211 24 236 27 (25) (11)
Operations 96 11 111 13 (15) (14)
Administrative 30 3 29 3 1 3
----- ----- -----
Total Expenses 337 38 376 44 (39) (10)
----- ----- -----
EBITDA (1) 260 30 216 25 44 20
EBIT (2) 60 7 (31) (4) 91 n/a
(1) EBITDA is defined as operating income before depreciation and
amortization.
(2) EBIT is defined as operating income before integral cost of financing
and taxes.
NET REVENUES Net revenues of Ps. 880.4 million for the three
months ended March 31, 2003, increased by Ps. 17.8
million or 2.1% as compared to the same period of the
prior year, mainly due to the sustained growth of our
subscriber base. We have not increased prices during
2003, as we did last year.
COST OF SERVICES
AND SALES Cost of services and sales increased by Ps. 12.4
million or 4.6% to Ps. 283.4 million for the three
months ended March 31, 2003. This increase was
primarily due to higher subscriber activations and
related costs, as well as higher costs directly
affected by the devaluation of the peso versus the US
dollar.
OPERATING EXPENSES Total expenses of Ps. 336.5 million for the three
months ended March 31, 2003, decreased by Ps. 38.8
million or 10.3% as compared to the same period of the
prior year, mainly due to lower free special events and
lower personnel cost.
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EBITDA EBITDA of Ps. 260.5 million for the three months
ended March 31, 2003, improved by Ps. 44.2 million or
20.4%, as compared to the same period of 2002, mainly
due to higher revenues and lower expenses, partially
offset by higher cost of services and sales as
described above.
In the first quarter of 2003, EBITDA margin increased
17.9% from 25.1% to 29.6% as compared to the first
quarter of 2002.
EBIT
OPERATING INCOME EBIT improved by Ps. 91.3 million to a positive
Ps. 60.1 million in the three months ended March 31,
2003, as compared to a negative Ps. (31.2) million
during the same period of 2002. As a result, EBIT
margin increased to 6.8% in the first quarter of 2003
from a negative 3.6% in the first quarter of 2002.
NET LOSS Innova reported a net loss of Ps. 372.7 million for
the three months ended March 31, 2003, as compared to a
net loss of Ps. 27.1 million in the same period of
2002.
The increase in net loss during this first quarter of
2003 as compared to the same period of prior year was
primarily due to the foreign exchange loss of Ps. 309.8
million as compared to a foreign exchange gain of Ps.
146.3 million during the first quarter of 2002; as well
as the higher interest expense incurred by the Company.
The Company's foreign exchange losses during 2003 were
primarily due to the depreciation of the Mexican peso
against the U.S. dollar of approximately 3.1% at the
end of the first quarter of 2003 and 19.6% during the
last twelve months.
Additional devaluations of the peso will likely affect
our liquidity and results of operations, considering
our substantial U.S. dollar-denominated indebtedness,
operating costs and expenses, while our revenues are
primarily peso-denominated. Any decrease in the value
of the peso against the U.S. dollar could cause us to
incur foreign exchange losses, which will reduce our
net income.
5
FUNDING FROM Innova did not require additional funding from its
- ------------ shareholders during the first quarter of 2003,
SHAREHOLDERS including for the payment of the April 1st, 2003
- ------------ interest coupon.
This was mainly due to strong cash flow from
collections and the current balance of cash resources
available. This is the first time that we have not
required funds from our shareholders for a period of
four straight quarters.
From the Company's inception through March 31, 2003,
Innova's shareholders have contributed an aggregate of
US$458.9 million to Innova, including US$149.0 million
in equity and US$309.9 million in long-term loans.
Shareholder's loans accrue interest at a fixed rate of
9% per annum (plus any applicable withholding taxes)
and mature in 10 years from the date on which the funds
were received.
RECENT On March 19, 2003, the court issued a resolution
- ------ against article 5 of the Mexican Asset Tax Law, which
DEVELOPMENTS does not enable taxpayers to deduct debts payable to
- ------------ nonresidents from the taxable asset's value. Since the
ASSET TAX declaratory judgment was favorable to us, to the extent
RESOLUTION that the Asset Tax Law is not amended, we will be able
to deduct debts payable to nonresidents from the asset
tax basis.
We are analyzing the alternatives to recover from the
Mexican tax authorities the amount of taxes unduly paid
for the tax years 2001 and 2002, as well as for January
and February of 2003.
6
Innova, S. de R.L. de C.V., is a joint venture indirectly owned by Grupo
Televisa, S.A., a Mexican corporation ("Televisa"), The News Corporation
Limited, a South Australia corporation ("News Corporation"), and Liberty
Media International Inc., a Delaware corporation ("Liberty Media"),
(formerly known as Tele-Communications International, Inc.).
Grupo Televisa S.A., is the largest media company in the Spanish-speaking
world, and a major player in the international entertainment business. It
has interests in television production and broadcasting, programming for
pay television, international distribution of television programming,
direct-to-home satellite services, publishing and publishing distribution,
cable television, radio production and broadcasting, professional sports
and show business promotions, paging services, feature film production and
distribution, dubbing, and the operation of a horizontal Internet portal.
Grupo Televisa also has an unconsolidated equity stake in Univision, the
leading Spanish-language television company in the United States.
News Corporation is a diversified international communications company with
operations in the United States, Canada, continental Europe, the United
Kingdom, Australia, Latin America and the Pacific Basin that include the
production of motion pictures and television programming; television,
satellite and cable broadcasting; the publication of newspapers, magazines
and books; the production and distribution of promotional and advertising
products and services; the development of digital broadcasting; the
development of conditional access and subscriber management systems; and
the creation and distribution of on-line programming.
Liberty Media International owns and operates broadband cable television
and telephony distribution networks and is a provider of diversified
programming services in Europe, Latin America and Asia.
This press release contains forward-looking statements regarding the
Company's results and prospects. Actual results could differ materially
from these statements. The forward-looking statements in this press release
should be read in conjunction with the factors described in "Item 3. Risk
Factors" in the Company's Annual Report on Form 20-F, which among others,
could cause actual results to differ materially from those contained in any
oral statements made by authorized officers of the Company. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Contact:
CARLOS FERREIRO
Chief Financial Officer
Innova, S. de R.L. de C.V.
Insurgentes Sur No.694
Col. del Valle
Mexico City, 03100
(5255) 5448-4131
cferreiro@sky.com.mx
- --------------------
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INNOVA, S. DE R.L. DE C.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
STATEMENTS PREPARED UNDER MEXICAN GAAP
(THOUSANDS OF MEXICAN PESOS IN PURCHASING POWER AS OF MARCH 31, 2003)
THREE MONTHS ENDED MARCH 31,
2003 2002
-------------- -----------
NET REVENUES PS. 880,395 PS. 862,614
COST OF SERVICES AND SALES 283,397 271,013
-------------- -----------
GROSS PROFIT 596,998 591,601
-------------- -----------
OPERATING EXPENSES:
Selling 210,613 235,997
Operations 95,980 110,940
Administrative 29,929 28,386
-------------- -----------
336,522 375,323
-------------- -----------
EBITDA 260,476 216,278
DEPRECIATION AND AMORTIZATION 200,388 247,492
-------------- -----------
OPERATING INCOME (LOSS) - EBIT 60,088 (31,214)
-------------- -----------
INTEGRAL COST OF FINANCING:
Interest expense 268,805 227,995
Interest income (7,890) (2,110)
Foreign exchange loss (gain) - net 309,834 (146,300)
Gain from monetary position (122,540) (108,016)
-------------- -----------
448,209 (28,431)
-------------- -----------
Special Items & other expense - net 4,564 12,170
-------------- -----------
LOSS BEFORE TAXES (392,685) (14,953)
Income tax and Asset tax
(benefit) provision (19,995) 12,108
-------------- -----------
NET LOSS PS. (372,690) PS. (27,061)
============== ===========
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INNOVA, S. DE R.L. DE C.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2003 AND 2002 (UNAUDITED)
STATEMENTS PREPARED UNDER MEXICAN GAAP
(THOUSANDS OF MEXICAN PESOS IN PURCHASING POWER AS OF MARCH 31, 2003)
ASSETS MARCH 03 MARCH 02
--------------- ---------------
Cash and cash equivalents Ps. 514,200 Ps. 52,906
Trade accounts receivable 140,398 182,492
Value added tax credit 1,538 1,437
Spare parts 12,890 8,213
Prepaid expenses and other 146,896 139,631
--------------- ---------------
TOTAL CURRENT ASSETS 815,922 384,679
PROPERTY AND EQUIPMENT - NET 1,483,007 1,836,699
PAS - 9 SATELLITE-NET 1,272,378 1,174,537
OTHER NON-CURRENT ASSETS - NET 90,633 181,406
--------------- ---------------
TOTAL ASSETS PS. 3,661,940 PS. 3,577,321
=============== ===============
LIABILITIES
Trade accounts payable and accruals Ps. 449,809 Ps. 367,712
PanAmSat Pas-9 49,039 44,508
Due to affiliated companies and other related parties 342,366 212,307
Accrued interest 260,579 11,839
Accrued taxes 171,733 70,524
Deferred income - Pre-billed and pre-collected services 123,730 110,328
--------------- ---------------
TOTAL CURRENT LIABILITIES 1,397,256 817,217
--------------- ---------------
Senior Exchange Notes due 2007 4,047,000 3,569,334
Long-term loans from Stockholders 3,344,440 2,949,695
Long-term interest on Stockholders loans 784,404 404,637
Seniority premiums 1,341 505
PanAmSat Pas-9 1,404,141 1,277,805
--------------- ---------------
TOTAL NON-CURRENT LIABILITIES 9,581,326 8,201,976
--------------- ---------------
TOTAL LIABILITIES 10,978,582 9,019,194
--------------- ---------------
STOCKHOLDERS' DEFICIT
Capital stock 1,936,456 1,936,456
Accumulated loss (8,894,723) (7,099,117)
Loss for the three-month period (372,690) (27,061)
Excess from restatement - Inflationary effects on Balance Sheet 14,315 (252,151)
--------------- ---------------
TOTAL STOCKHOLDERS' DEFICIT (7,316,642) (5,441,873)
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT PS. 3,661,940 PS. 3,577,321
=============== ===============
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