UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER PURSUANT TO RULES 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of April, 2006
Commission File Number: 333-7484
INNOVA, S. de R.L. de C.V.
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(Translation of registrant's name into English)
Insurgentes Sur 694 Piso 8, Col. Del Valle 03100 Mexico, D.F. Mexico
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(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
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(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934.)
Yes No X
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(If "Yes" is marked indicate below the file number assigned to the
registrant in connection with Rule 12g-3-2(b): 82_____.)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INNOVA, S. de R.L. de C.V.
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(Registrant)
Dated: April 28, 2006 By /s/ Carlos Ferreiro Rivas
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Name: Carlos Ferreiro Rivas
Title: Chief Financial Officer
[GRAPHIC OMITTED][GRAPHIC OMITTED]
FOR IMMEDIATE RELEASE
INNOVA, S. de R.L. de C.V.
REPORTS FIRST QUARTER 2006 RESULTS
SUBSCRIBER BASE GROWS TO 1,315,100
The number of gross active subscribers increased 18.7% to 1,315,100 as of
March 31, 2006 from 1,107,500 as of March 31, 2005.
NET REVENUES INCREASED 27.3%
NET REVENUES for the first quarter of 2006 increased 27.3% to Ps. 1,715.8
million from Ps. 1,348.0 million for the same period of the prior year.
OIBDA INCREASED 48.3% TO PS. 782.0 MM
OIBDA for the first quarter of 2006 increased 48.3% to Ps. 782.0 million
from Ps. 527.2 million for the same period of the prior year. OIBDA margin
reached a record of 45.6% versus 39.1% in the first quarter of last year.
DEBT REFINANCING
96.25% of Innova's US$300 million Senior Notes due 2013 were tendered.
Funding from two peso Bank loans and cash on hand will be used to pay for
the tender.
FIRST QUARTER 2006 [COMPANY LOGO OMITTED]
Mexico City, April 27, 2006. INNOVA, S. DE R.L. DE C.V. ("INNOVA" OR
"SKY"), 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, 2006. The attached results have been
prepared in accordance with Mexican GAAP in constant Mexican pesos in
purchasing power as of March 31, 2006.
SUBSCRIBER BASE
The number of gross active subscribers increased to 1,315,100 (including
73,600 commercial subscribers) as of March 31, 2006. This represents an
18.7% increase from 1,107,500 (including 63,400 commercial subscribers) as
of March 31, 2005, or an increase of 207,600 gross active subscribers.
We believe the increase in our subscriber base was primarily due to the
sustained growth in customer activations in response to our marketing
campaigns, our high quality content, our unique exclusive events and our
customer service.
The increase in our subscriber base was partially offset by subscriber
cancellations. Nevertheless, we experienced a decline in the annual rate of
subscriber cancellations as of March 31, 2006 as compared to the prior
year.
Gross Active Subscribers
[Bar Graph Omitted]
857k 1,003k 1,251k 1,315k
Dec 03 Dec 04 Dec 05 Mar 06
PROGRAMMING CONTENT
During the first quarter of 2006, Sky continued to enhance its programming
content, by offering the following content and exclusive events:
o Pay-TV exclusive broadcast of certain soccer matches of the Mexican
2006 Closing Soccer Tournament;
o Pay-TV exclusive broadcast of the US PGA and Champions Tour Golf
Tournaments;
o Transmission of certain matches of the Mexican Baseball League;
o Pay-TV exclusive broadcast of certain boxing matches, such as those of
"Terrible" Morales, D. Corrales, JL Castillo, J. Arce and M. Pacquiao;
o Transmission of certain of the semi-finals and final matches of the
ATP 2006 International Tennis Tournament;
o Launching of SKY ONE, an exclusive channel for special events such as
the reality show "Cantando por un Sueno", and
o Launching of TCM and MGM (movie channels), Hustler TV (adult oriented
channel), MTV Hits and MTV Jams (music videos channels) and Nick GaS
(kids channel).
PRICE AND PROMOTIONS
[GRAPHIC OMITTED]
Innova's installation fee is Ps. 1,199. However, under our current
subscription promotion, the installation fee is Ps. 199 or Ps. 899 for
those residential subscribers who agree to pay the monthly programming fee
via automatic charge to a credit card or a debit card, respectively.
We continue our efforts to improve the quality of our subscriber base and
the collection of subscriber fees by, among other things, encouraging new
and current subscribers to pay monthly programming fees through an
automatic charge to their credit or debit card.
FINANCIAL REVIEW
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED MARCH 31, 2006 AND 2005
STATEMENTS PREPARED UNDER MEXICAN GAAP (UNAUDITED)
Millions of constant Mexican Pesos as of March 31, 2006
Three Months Ended March 31
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2006 % Margin 2005 % Margin Change %
NET REVENUES 1,716 100 1,348 100 368 27
Cost of Sales 424 25 400 30 24 6
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Gross Profit 1,292 75 948 70 344 36
Selling 336 20 301 22 35 12
Operations 138 8 85 6 53 62
Administrative 36 2 35 3 1 3
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Total Expenses 510 30 421 31 89 21
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OIBDA (1) 782 46 527 39 255 48
Operating Income 525 31 331 25 194 59
<FN>
(1) OIBDA is defined as operating income before depreciation and amortization.
</FN>
NET REVENUES
Net revenues of Ps. 1,715.8 million for the three months ended March 31,
2006, increased by Ps. 367.8 million or 27.3% as compared to the same
period of the prior year due to the sustained growth of our subscriber
base.
COST OF SERVICES AND SALES
Cost of services and sales increased by Ps. 24.0 million or 6.0% to Ps.
423.8 million for the three months ended March 31, 2006 as compared to the
same period of the prior year. This increase was primarily due to higher
programming and other costs associated with our larger subscriber base as
well as to the negative impact of the peso depreciation against the US
dollar, partially offset by lower uplink and downlink costs.
OPERATING EXPENSES
Total expenses of Ps. 510.0 million for the three months ended March 31,
2006, increased by Ps. 89.0 million or 21.1% as compared to the same period
of the prior year. This variance was primarily due to repair of equipment
cost related to the hurricane season and the smart card changeover process
closing expenses. In addition free special events, marketing, call center
and collection expenses also experienced an increase mainly due to our
larger subscriber base.
OIBDA
OIBDA of Ps. 782.0 million for the three months ended March 31, 2006,
improved by Ps. 254.8 million or 48.3%, as compared to the same period of
2005, primarily due to higher revenues partially offset by higher cost of
services and sales and operating expenses, as described above.
As a result, OIBDA margin increased from 39.1% for the first quarter of
2005 to 45.6% for the first quarter of 2006.
OPERATING INCOME
Operating income improved by Ps. 194.5 million or 58.9% to Ps. 525.0
million for the three months ended March 31, 2006, as compared to Ps. 330.5
million during the same period of 2005. As a result, operating income
margin increased to 30.6% in the first quarter of 2006 as compared to 24.5%
in the first quarter of 2005.
NET INCOME
Innova reported a net income of Ps. 180.7 million for the three months
ended March 31, 2006, as compared to Ps. 211.3 million for the same period
of 2005. This decrease was primarily due to the negative impact for the
application of Mexican GAAP Bulletin D-4, in connection with Innova's
expected taxable income position for the coming years, which is similar to
FASB-109 "Accounting for Income Taxes"; as well as higher foreign exchange
losses due to the negative impact of the peso depreciation against the US
dollar, partially offset by lower interest expenses.
The 2.6% peso depreciation versus the U.S. dollar during the first quarter
2006 as compared to 0.1% peso depreciation versus the U.S. dollar during
the first quarter 2005, had a negative impact in our results as explained
above.
Nevertheless, future devaluations of the peso will likely affect our
liquidity and results of operations, due to the fact that our indebtedness,
capital expenditures, satellite and a portion of our operating costs and
expenses are U.S. dollar-denominated, 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 would reduce
our net income.
CAPITAL EXPENDITURES (CAPEX)
The attached table shows our CAPEX for the first quarter ended March 31,
2006 and 2005. The decrease in 2006 as compared to 2005 was mainly due to
the migration of DTV subscribers as well as for the smart card changeover
process that took place primarily during 2005.
Million of U.S. Dollars
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1Q
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2006 20.6
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2005 28.7
RECENT DEVELOPMENTS
DEBT REFINANCING
On March 13, 2006 we launched a Cash Tender Offer to purchase up to 65% of
Innova's US$300 million 9.375% Senior Notes due 2013 ("The Notes"). On
April 10, 2006 we extended the settlement of such Tender Offer and also
offered to purchase up to 100% of the Notes.
As of April 25, 2006, 96.25% of the Notes have been tendered at a price of
112.329, which represents a total amount of US$324.3 million to be paid by
the Company in connection with the Tender Offer on April 28, 2006.
In order to pay for the above transaction, we have entered into two bank
loans, both of them in Mexican pesos and guaranteed by Grupo Televisa:
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BANK PS.MM RATE TENOR
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Santander 1,400 8.98% 3 yr TIEE + 24 bps 10 yr
4-10 yr
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Banamex 2,100 8.74% 10 yr
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We will use cash on hand to repay the remaining amount of the transaction
plus fees and expenses incurred in connection with the Tender Offer.
With these transactions we have:
a) Significantly reduced our foreign exchange exposure;
b) Taken advantage of historical low peso interest rates, and
c) Decreased our interest expense.
EQUITY OWNERSHIP
In April 2006 Grupo Televisa exercised its option to acquire two-thirds of
the equity interest that DIRECTV acquired from Liberty Media. As a result,
Innova's current equity is indirectly held by Televisa 58.7% and DIRECTV
41.3%.
INNOVA, S. DE R.L. DE C.V., is a joint venture indirectly owned by Grupo
Televisa, S.A., a Mexican corporation ("Televisa"), and The DIRECTV Group,
Inc, a Delaware corporation ("DIRECTV"). For more information, please visit
www.sky.com.mx.
GRUPO TELEVISA S.A., is the largest media company in the Spanish-speaking
world, and a major participant in the international entertainment business.
It has interests in television production and broadcasting, production of
pay television networks, international distribution of television
programming, direct-to-home satellite services, publishing and publishing
distribution, cable television, radio production and broadcasting,
professional sports and live entertainment, feature film production and
distribution, and the operation of a horizontal Internet portal. Grupo
Televisa also owns an unconsolidated equity stake in Univision, the leading
Spanish-language media company in the United States. For more information,
please visit www.televisa.com.
THE DIRECTV GROUP, INC. is a world-leading digital television service.
DIRECTV is approximately 37 percent owned by News Corporation. For more
information, please visit www.directv.com.
This press release contains forward-looking statements regarding Innova's
results and prospects. Actual results could differ materially from these
statements. The forward-looking statements in this press release,
including, but not limited to Company's debt refinancing and equity
ownership, 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.
Contacts:
CARLOS FERREIRO JUAN CARLOS MUNOZ
Chief Financial Officer Head of Investor Relations
Innova, S. de R.L. de C.V. Innova, S. de R.L. de C.V.
Insurgentes Sur No.694 (5255) 5448-4000 ext.6642
Col. del Valle jmunoz@sky.com.mx
Mexico City, 03100
(5255) 5448-4131
cferreiro@sky.com.mx
INNOVA, S. DE R.L. DE C.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
STATEMENTS PREPARED UNDER MEXICAN GAAP
(THOUSANDS OF MEXICAN PESOS IN PURCHASING POWER AS OF MARCH 31, 2006)
Three months ended March 31,
2006 2005
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NET REVENUES Ps. 1,715,786 Ps. 1,347,971
COST OF SERVICES AND SALES 423,815 399,814
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GROSS PROFIT 1,291,971 948,157
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OPERATING EXPENSES:
Selling 335,642 301,264
Operations 138,815 84,345
Administrative 35,547 35,362
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510,004 420,971
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OIBDA 781,967 527,186
DEPRECIATION AND AMORTIZATION 256,941 196,641
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OPERATING INCOME 525,026 330,545
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INTEGRAL COST OF FINANCING:
Interest expense 141,726 162,383
Interest income (11,781) (8,728)
Foreign exchange loss (gain) - net 79,514 11,492
Gain from monetary position (31,280) (40,627)
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178,179 124,520
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Special items & other expense - net - (5,284)
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INCOME BEFORE TAXES
AND MINORIRTY INTEREST 346,847 211,309
Provision for income tax 4 53
Income tax 166,084 -
Minority interest 50 (60)
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NET INCOME Ps. 180,709 Ps. 211,316
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INNOVA, S. DE R.L. DE C.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2005 AND MARCH 31, 2006
STATEMENTS PREPARED UNDER MEXICAN GAAP
(THOUSANDS OF MEXICAN PESOS IN PURCHASING POWER AS OF MARCH 31, 2006)
March 31, 2006 December 31, 2005
(UNAUDITED) (AUDITED)
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ASSETS
Cash and cash equivalents Ps. 1,191,459 Ps. 841,330
Trade accounts receivable 270,885 126,490
Value added tax credit 67,955 -
Spare parts 68,509 60,671
Prepaid expenses and other 163,763 217,159
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TOTAL CURRENT ASSETS 1,762,571 1,245,650
PROPERTY AND EQUIPMENT - NET 1,992,879 1,976,301
PAS - 9 SATELLITE-NET 1,056,642 1,063,548
OTHER NON-CURRENT ASSETS - NET 437,095 474,609
DEFERRED INCOME TAX 1,149,853 1,327,340
TOTAL ASSETS Ps. 6,399,040 Ps. 6,087,448
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LIABILITIES
Trade accounts payable and accruals Ps. 668,683 Ps. 448,935
PanAmSat Pas-9 79,830 76,259
Due to affiliated companies and other related parties 166,643 907,899
Accrued interest 13,454 87,829
Accrued taxes 28,092 25,964
Deferred income - Pre-billed and pre-collected services 250,565 237,558
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TOTAL CURRENT LIABILITIES 1,207,267 1,784,444
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Senior notes due 2013 3,271,200 3,215,580
Televisa Loan 500,000 504,334
Seniority premiums 8,642 8,277
PanAmSat Pas-9 1,197,106 1,197,220
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TOTAL NON-CURRENT LIABILITIES 4,976,948 4,925,411
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TOTAL LIABILITIES 6,184,215 6,709,855
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EQUITY OWNERS' DEFICIT
Social Parts 6,551,777 6,937,100
Additional paid-in capital 187,299 187,386
Accumulated loss (6,688,955) (10,292,881)
Net income for the period 180,709 2,596,647
Excess from restatement-inflationary (16,005) (50,659)
effects on Balance Sheet ---------- ---------
TOTAL OWNERS' EQUITY (DEFICIT) 214,825 (622,407)
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TOTAL LIABILITIES AND OWNERS' EQUITY (DEFICIT) Ps. 6,399,040 Ps. 6,087,448
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