SBS Broadcasting SA Reports Third Quarter 2004 Results THIRD
QUARTER Net Revenue up by 21% Station Operating Cash Flow improved
by 19% Adjusted EBITDA improved by 23% LUXEMBOURG, Nov. 1
/PRNewswire-FirstCall/ -- SBS Broadcasting SA (Nasdaq: SBTV;
Euronext Amsterdam N.V.: SBS) today reported financial results for
the three and nine months ended September 30, 2004. Results, which
are attached, are in thousands of euro (except share data)
converted from local currencies. The following report should be
read in conjunction with the accompanying financial statements.
Financial highlights are as follows: Three months ended September
30, 2003 2004 % change Net revenue 115,228 euros 139,169 euros 21%
Station operating cash flow (1) 11,915 14,176 19% Adjusted EBITDA
(2) 8,153 10,062 23% Operating income 2,311 1,367 (41%) Net income
(loss) (3) 20,064 (2,006) Net income (loss) per common share 0.70
euros (0.06) euros Weighted average common shares(4) 28,621 31,311
Cash provided by operating activities 6,418 1,545 Station operating
cash flow margin(5) 10.3% 10.2% Adjusted EBITDA margin(5) 7.0% 7.2%
Nine months ended September 30, 2003 2004 % change Net revenue
385,810 euros 467,050 euros 21% Station operating cash flow (1)
47,093 67,589 44% Adjusted EBITDA (2) 36,780 56,572 54% Operating
income 19,613 33,744 72% Net income (loss) (3) 27,633 12,218 Net
income (loss) per common share 0.97 euros 0.39 euros Weighted
average common shares(4) 28,618 31,175 Cash provided by operating
activities 27,196 5,898 Station operating cash flow margin(5) 12.2%
14.5% Adjusted EBITDA margin(5) 9.5% 12.1% (1) Station operating
cash flow ("STOCF") is defined as operating income plus corporate
expenses, non-cash compensation, depreciation and amortization
expenses (for additional information, including a reconciliation to
operating income, see page 12). (2) Adjusted EBITDA is defined as
operating income plus non-cash compensation, depreciation and
amortization expenses (for additional information, including a
reconciliation to operating income, see page 12). (3) The net
income (loss) for the three and nine month periods ended September
30, 2003, includes a non-cash investment gain of 30.2 million euros
realized on the Veronica transaction completed on September 1,
2003. (4) Weighted average common shares for the three and nine
month periods ended September 30, 2004, includes 1,827,047 shares
issued in connection with our redemption of the 7% Convertible
Subordinated Notes in December 2003. (5) Station operating cash
flow margin is STOCF expressed as a percentage of net revenue, and
Adjusted EBITDA margin is Adjusted EBITDA expressed as a percentage
of net revenue. Commenting on the results, Markus Tellenbach, Chief
Executive Officer of SBS, said: "We continued to generate improved
results during the third quarter despite strong competition for
viewers from the Olympic Games. Our television stations are
performing well and in particular our stations in Hungary, Sweden
and Belgium continue to generate impressive results. We have
reduced operating costs as a percentage of revenue, thereby
generating significant operating leverage. "Utilizing our market
knowledge and the operating infrastructure of our television group,
we are launching new channels across our pan-European footprint and
will operate multiple stations in almost all of our markets by
year-end. By prudently building on our existing asset base we are
strategically positioning the Company to garner an increased share
of the overall advertising market and new revenue streams. With a
solid balance sheet and commitment to profitability, we continue to
explore accretive transactions in television and radio that will
complement our operations as the Company continues to grow." Recent
Developments Television Norway On July 8, 2004, we acquired a 49.3%
minority interest in TV Norge AS for cash consideration of NOK 260
million (30.8 million euros) from TV2 AS, increasing our ownership
stake in TV Norge AS to 100%. Digital Channels On August 16, 2004,
the Company launched its digital music service, The Voice TV, in
Denmark. With an initial reach of over 60% of Danish television
households, the channel primarily targets 12-19 year olds and is
co-branded with our leading Danish radio station. The Company
intends to launch further co-branded digital music services in
Finland, Sweden and Norway before the end of the year. All of the
channels will be the first music channels in these markets to be
broadcast in the respective local language. The channels will
utilize the operating expertise and marketing resources provided by
our established television stations, as well as benefit from our
extensive music experience in operating our radio stations in these
markets. We expect the digital channels to benefit from the
development of new revenue streams from subscriptions and
transactions resulting from viewers interactions with each channel
via SMS and phone lines, including actively selecting videos and
participating in chat forums, polls and games. Hungary On September
13, 2004, we launched Irisz, our second television channel in the
Hungarian market. The wholly-owned channel is broadcast from 6 p.m.
to 11 p.m. on the Hungarian feed of Club, a female-oriented channel
that is indirectly owned by UGC Europe BV, our largest shareholder.
Irisz, which reaches approximately 700,000 homes through cable
carriage, is an entertainment channel focused on the 18-49 female
audience. Its programming schedule complements Club's female focus
and leverages our Hungarian program library. The channel is
broadcast from Amsterdam under a Dutch broadcasting license.
Belgium On October 1, 2004, the Company launched its second
television channel in Belgium, VijfTV ("5TV"), with an approximate
reach of 97% of Flemish homes through over-the-air broadcast and
cable on a must-carry basis. The new channel will be targeted to
females aged 20-49 and its schedule will be programmed to
complement VT4, our existing television station in Belgium. The new
channel will to a large extent utilize VT4's existing sales,
marketing, technical and operating facilities in Flanders. Radio
Norway & Denmark On September 8, 2004 we repurchased for 18.6
million euros in cash, all of the 856,494 SBS common shares used in
September 2003 to acquire Radio 1 in Norway and Radio 2 in Denmark
from wholly owned subsidiaries of Clear Channel Communications,
Inc. and Norsk Aller AS. Greece In October 2004, the Greek Council
of State granted several applications for the annulment of all 15
four-year FM radio licenses awarded by the Greek Ministry of Press
and Mass Media (the "Greek Ministry") in March 2002, which include
the license granted to Lampsi, our FM station in Athens. The
decision was based on a number of alleged deficiencies in the
license tender process (and, with respect to Lampsi, on the grounds
that Lampsi's ownership structure does not comply with Greek media
law) and is not subject to appeal. Although the current legal
situation remains unclear and it is possible that Lampsi and the
other radio stations currently operating under the annulled
licenses will have to cease broadcasting, we expect that the Greek
Ministry will initiate a new radio license tender in late 2004 or
early 2005 and that the radio stations whose licenses were annulled
will be permitted to continue to broadcast until new licenses are
awarded. We expect that Lampsi will participate in any new radio
license tender in accordance with applicable laws and regulations.
Other During July, August and September 2004, the Company acquired
and redeemed an additional 16.5 million euros of its 12% Senior
Notes due 2008 at a loss of 2.7 million euros. On October 20, 2004,
we sold our investment in Telitas AS for a cash consideration of
2.8 million euros. We will record an investment gain of 2.6 million
euros on this sale. Overview We prepare our financial statements in
euro and in accordance with accounting principles generally
accepted in the US ("US GAAP"). Our consolidated financial
statements for the three and nine months ended September 30, 2004
were affected by the sale of our 30.4% equity interest in TVN and
TVN7 in Poland in December 2003, and by the acquisition of the
Print operations from Veronica Holding B.V. in September 2003, the
acquisition of Radio operations in Norway and Denmark in September
2003, and the merger of our Swedish Radio operations with Bonnier
Radio AB in October 2003 (the "2003 Acquired Operations"). They
were also to a lesser extent affected by the launch of our first
digital television station, The Voice TV, in Denmark in August
2004. Our consolidated broadcasting operations generate revenue
primarily in Norwegian kroner, Swedish kronor, Danish kroner,
Hungarian forint and euro, and incur substantial operating expenses
in these currencies. We also incur significant operating expenses
for programming in U.S. dollars, which are often hedged, and other
currencies. Balance sheet accounts are translated from foreign
currencies into euro at the period-end exchange rates and statement
of operations accounts are translated at the average exchange rates
for the period. Any resulting balance sheet translation adjustments
are recorded as other comprehensive income (loss) within
shareholders' equity. Currency translation adjustments relating to
our transactions and those of our subsidiaries in currencies other
than the functional currency of the entity involved are reflected
in the results of operations. In the discussions of the results for
the three and nine months ended September 30, 2004 compared to the
three and nine months ended September 30, 2003, we divide our
operations into three segments: * "Television operations", which
include: TVNorge (in Norway), Kanal 5 (in Sweden), TvDanmark and
Kanal 5 (in Denmark) and jointly referred to as "our Danish
Television operations"; VT4 (in Flemish Belgium), SBS6, NET5 and
Veronica (in The Netherlands) and jointly referred to as "our Dutch
Television operations"; TV2 (in Hungary); The Voice TV (in
Denmark); and other related operations that are not material. *
"Radio operations", which include: The Voice, Pop FM and, from
September 2003, Radio 2 and Nyhedsradioen 24/7 (in Denmark) and
jointly referred to as "our Danish Radio operations"; The Voice in
Stockholm, Radio City in Gothenburg and Malmoe, 106.7 Rockklassiker
and Studio 107.5 in Stockholm, and, from October 2003, Mix Megapol,
Vinyl and Lugna Melodier (in Sweden) and jointly referred to as
"our Swedish Radio operations"; from September 2003, Radio 1 and
The Voice (in Norway) and jointly referred to as "our Norwegian
Radio operations"; KISS FM, Radio City, Radio Sata, Radio Mega,
Radio 957, Radio Jyvaskyla and Iskelmaradio (in Finland) and
jointly referred to as "our Finnish Radio operations"; and Lampsi
(in Greece). * "Print operations", which include the Veronica
Magazine and the Satellite Magazine in the Netherlands. We acquired
these magazines on September 1, 2003, and accordingly, the results
of operations have been reflected in our consolidated financial
statements since that date. Results from TVN and TVN7 in Poland
(through December 2, 2003), prima TV in Romania, and ATV in Austria
(through December 4, 2003) are not included in the operations
referred to above, but are included in equity in income (loss) from
unconsolidated subsidiaries. These are subsidiaries in which we
hold an interest of less than half of the voting rights or are
otherwise unable to exercise control over the operations. When
analyzing results within the different categories of operations for
any particular period, the sums of the individual items reported
within each category may differ from the total reported for such
category. Differences are primarily attributable to corporate
charges, eliminations between categories and items attributable to
entities that are not separately disclosed but are included within
the totals for the different categories. Operating Expenses as a
Percentage of Revenue Three months ended Nine months ended
September 30, September 30, 2003 2004 2003 2004 Net revenue 100.0%
100.0% 100.0% 100.0% Operating expenses: Station operating expenses
68.4% 67.1% 69.5% 65.9% Selling, general and administrative
expenses 21.3% 22.7% 18.3% 19.6% Corporate expenses 3.3% 3.0% 2.7%
2.4% Non-cash compensation 0.4% 1.1% 0.1% 0.5% Depreciation and
Amortization 4.6% 5.1% 4.3% 4.3% Three months ended September 30,
2004 compared to three months ended September 30, 2003 Net Revenue
Net revenue increased 23.9 million euros, or 21%, from 115.2
million euros for the three months ended September 30, 2003 to
139.2 million euros for the three months ended September 30, 2004.
Our Television operations net revenue increased 11.6 million euros,
or 12%, due to increased net revenue of 4.7 million euros, or 33%,
from TV2, primarily reflecting an increase in the television
advertising market. VT4 had increased net revenue of 2.2 million
euros, or 23%, and our Dutch Television operations had increased
net revenue of 2.0 million euros, or 5%, mainly due to increased
viewing shares. Our Danish Television operations had an increase in
net revenue of 1.8 million euros, or 21%, due to an increase in
viewing shares and in the television advertising market. TV Norge
had increased net revenue of 1.3 million euros, or 13%, and Kanal 5
had increased net revenue of 1.0 million euros, or 6%, mainly due
to increases in the television advertising markets. Our Radio
operations net revenue increased 2.6 million euros, or 25%, mainly
due to net revenue at the 2003 Acquired Operations. Despite
additional revenue from the 2003 Acquired Operations, net revenue
at our Danish Radio operations decreased 1.5 million euros, mainly
due to a decrease in the Danish radio advertising market compared
to the three months ended September 30, 2003 and a decrease in
cable fees of approximately 0.4 million euros. Our Print operations
had net revenue of 14.8 million euros for the three months ended
September 30, 2004 compared to 5.0 million euros for the three
months ended September 30, 2003, where the Print operations were
included from September 1, 2003. Station Operating Expenses Station
operating expenses increased 14.6 million euros, or 18%, from 78.8
million euros for the three months ended September 30, 2003 to 93.3
million euros for the three months ended September 30, 2004, mainly
due to an early launch of the fall schedule at our television
stations and expenses at the 2003 Acquired Operations. Station
operating expenses expressed as a percentage of net revenue were
68.4% and 67.1% for the three months ended September 30, 2003 and
2004, respectively. The station operating expenses at our
Television operations increased 7.9 million euros, or 11%, mainly
due to increased programming expenses of 4.4 million euros, or 14%,
at our Dutch Television operations, of 1.3 million euros, or 17%,
at VT4 and of 1.2 million euros, or 21%, at TV Norge. This increase
was mainly due to an early launch of the fall schedule in order to
meet the competition from the Olympic Games, which were broadcast
at competitor stations. Our Radio operations had increased station
operating expenses of 1.4 million euros, or 34%, mainly due to
expenses at the 2003 Acquired Operations. Our Print operations had
print and distribution expenses of 8.1 million euros for the three
months ended September 30, 2004 compared to 2.9 million euros for
the three months ended September 30, 2003, where the Print
operations were included from September 1, 2003. Selling, General
and Administrative Expenses Selling, general and administrative
expenses increased 7.2 million euros, or 29%, from 24.5 million
euros for the three months ended September 30, 2003 to 31.7 million
euros for the three months ended September 30, 2004, mainly due to
expenses at the 2003 Acquired Operations and increased promotion
expenses in connection with the early launch of the fall schedule
at our television stations. Selling, general and administrative
expenses expressed as a percentage of net revenue were 21.3% and
22.7% for the three months ended September 30, 2003 and 2004,
respectively. As our Radio operations typically have relatively
higher selling, general and administrative expenses compared to our
Television and Print operations, the increase in expenses expressed
as a percentage of net revenue reflects the higher proportion of
expenses related to our Radio operations due to the 2003 Acquired
Operations. Corporate Expenses Corporate expenses increased 0.3
million euros from 3.8 million euros for the three months ended
September 30, 2003 to 4.1 million euros for the three months ended
September 30, 2004. Corporate expenses expressed as a percentage of
net revenue were 3.3% and 3.0% for the three months ended September
30, 2003 and 2004, respectively. Non-cash Compensation Non-cash
compensation increased 1.0 million euros from 0.5 million euros for
the three months ended September 30, 2003 to 1.5 million euros for
the three months ended September 30, 2004. The increase was mainly
due to a compensation charge of 1.3 million euros for the extension
of the expiry date for 250,000 stock options issued in 1994 to the
Chairman of the Company. Non- cash compensation expressed as a
percentage of net revenue was 0.4% and 1.1% for the three months
ended September 30, 2003 and 2004, respectively. Depreciation and
Amortization Expenses Depreciation and amortization expenses
increased 1.9 million euros, or 35%, from 5.3 million euros for the
three months ended September 30, 2003 to 7.2 million euros for the
three months ended September 30, 2004, mainly due to depreciation
and amortization expenses associated with our 2003 Acquired
Operations. Depreciation and amortization expenses expressed as a
percentage of net revenue were 4.6% and 5.1% for the three months
ended September 30, 2003 and 2004, respectively. Operating Income
Operating income decreased 1.0 million euros, or 43%, from 2.3
million euros for the three months ended September 30, 2003 to 1.3
million euros for the three months ended September 30, 2004. Our
Television operations had increased operating income of 1.1 million
euros, or 21%, from 5.0 million euros for the three months ended
September 30, 2003 to 6.1 million euros for the three months ended
September 30, 2004. The improvement was mainly due to increased
operating income at TV2 of 3.8 million euros and at our Danish
Television operations of 2.3 million euros. Such increases were
partly offset by decreased operating income at our Dutch Television
of 3.0 million euros, and by operating losses at our newly launched
station, The Voice TV, of 1.4 million euros. Our Radio operations
had operating losses of 1.2 million euros for the three months
ended September 30, 2004 compared to operating income of 0.8
million euros for the three months ended September 30, 2003, mainly
due to operating losses at the 2003 Acquired Operations and the
decrease in net revenue at our Danish Radio operations. Our Print
operations had increased operating income of 1.4 million euros. The
decrease was also due to increased corporate expenses of 0.3
million euros, increased non-cash compensation of 1.0 million euros
and increased depreciation and amortization of 1.9 million euros.
Equity in Loss from Unconsolidated Subsidiaries Equity in income
(loss) from unconsolidated subsidiaries improved 6.2 million euros
from a loss of 6.5 million euros for the three months ended
September 30, 2003 to a loss of 0.3 million euros for the three
months ended September 30, 2004, primarily related to our
investment in prima TV. The decrease was mainly attributable to the
absence in 2004 of an impairment charge of 6.1 million euros
related to our investment in TVN and TVN7 in Poland, which was sold
in December 2003. Net Interest Expense Net interest expense
decreased 3.2 million euros, or 57%, from 5.6 million euros for the
three months ended September 30, 2003 to 2.4 million euros for the
three months ended September 30, 2004. The decrease was mainly due
to reduced interest expense of 0.8 million euros as a result of our
redemption of the 7% Convertible Subordinated Notes in December
2003, a 0.9 million euros non-cash gain on an interest rate swap
related to our Senior Notes, a 0.5 million euros decrease due to
the redemption of 31.0 million euros of our Senior Notes and 0.5
million euros higher interest income. Foreign Exchange Gain Foreign
exchange gain decreased 2.4 million euros from 3.9 million euros
for the three months ended September 30, 2003 to 1.5 million euros
for the three months ended September 30, 2004. The decrease in
foreign exchange gain is mainly due to the absence of gains on our
7% Convertible Subordinated Notes, which we redeemed in December
2003. Investment Gain In the three months ended September 30, 2003,
we recorded net investment gains of 30.1 euros related to a
non-cash investment gain realized on our share of the transfer of
10% equity interest in our Dutch Television operations as
consideration for the acquisition of our Print operations. In the
three months ended September 30, 2004, we recorded a gain of 2.2
million euros reflecting an increase in the fair value of our 1.7
million warrants that are exercisable into common shares of Lions
Gate Entertainment Corp. until December 31, 2004 at an exercise
price of $5 per share. Gain (Loss) on Extinguishment of Debt In the
three months ended September 30, 2004, we recorded a loss of 2.7
million euros realized on the extinguishment of 16.5 million euros
principal amount of our Senior Notes. We recorded no gain (loss) on
extinguishment of debt for the three months ended September 30,
2003. Other Expenses, Net Other expenses, net, decreased 0.7
million euros, from 1.1 million euros for the three months ended
September 30, 2003 to 0.4 million euros for the three months ended
September 30, 2004. Income Taxes Income taxes increased 1.5 million
euros, from 0.9 million euros for the three months ended September
30, 2003 to 2.4 million euros for the three months ended September
30, 2004, mainly due to increased income before taxes at our Dutch
Print operations and at VT4 in Belgium. Net Income As a result of
the foregoing, our net income decreased 22.1 million euros from an
income of 20.1 million euros for the three months ended September
30, 2003 to a loss of 2.0 million euros for the three months ended
September 30, 2004. Without the non-cash investment gain in 2003 on
the Veronica transaction, the net loss decreased 8.1 million euros
from 10.1 million euros for the three months ended September 30,
2003 to 2.0 million euros for the three months ended September 30,
2004. Nine months ended September 30, 2004 compared to nine months
ended September 30, 2003 Net Revenue Net revenue increased 81.2
million euros, or 21%, from 385.8 million euros for the nine months
ended September 30, 2003 to 467.0 million euros for the nine months
ended September 30, 2004. Our Television operations net revenue
increased 30.0 million euros, or 9%, due to increased net revenue
of 11.1 million euros, or 21%, from TV2, primarily reflecting an
increase in the television advertising market. VT4 had increased
net revenue of 7.8 million euros, or 22%, and our Dutch Television
operations had increased net revenue of 6.1 million euros, or 5%,
mainly due to increased viewing shares. Our Danish Television
operations had an increase in net revenue of 2.8 million euros, or
10%, Kanal 5 had increased net revenue of 1.8 million euros, or 3%,
and TV Norge had increased net revenue of 0.4 million euros, or 1%,
primarily due to increases in the television advertising markets.
Our Radio operations net revenue increased 10.5 million euros, or
35%, mainly due to revenue at the 2003 Acquired Operations. Despite
net revenue from the 2003 Acquired Operations, net revenue at our
Danish Radio operations decreased 2.4 million euros, mainly due to
a decrease in cable fees of 1.2 million euros and a decrease in the
Danish radio advertising market compared to the nine months ended
September 30, 2003. Our Print operations had net revenue of 45.7
million euros for the nine months ended September 30, 2004 compared
to 5.0 million euros for the nine months ended September 30, 2003,
where the Print operations were included from September 1, 2003.
Station Operating Expenses Station operating expenses increased
39.8 million euros, or 15%, from 268.1 million euros for the nine
months ended September 30, 2003 to 307.9 million euros for the nine
months ended September 30, 2004, mainly due to expenses at the 2003
Acquired Operations. Station operating expenses expressed as a
percentage of net revenue were 69.5% and 65.9% for the nine months
ended September 30, 2003 and 2004, respectively. The station
operating expenses at our Television operations increased 9.6
million euros, or 4%, mainly due to increased programming expenses
of 7.4 million euros, or 7%, at our Dutch Television operations and
1.8 million euros, or 7%, at VT4. This increase was mainly due to
an early launch of the fall schedule in order to meet the
competition from the Olympic Games, which were broadcast at
competitor stations. Our Danish Television operations had increased
programming expenses of 1.7 million euros, or 8%, following the re-
launch of both stations in April 2004. Such increases were partly
offset by reduced programming expenses of 1.5 million euros, or 4%,
at TV2 and of 0.9 million euros, or 4%, at TV Norge. Our Radio
operations had increased station operating expenses of 7.1 million
euros, or 59%, mainly due to expenses at the 2003 Acquired
Operations. Our Print operations had print and distribution
expenses of 26.0 million euros for the nine months ended September
30, 2004 compared to 2.9 million euros for the nine months ended
September 30, 2003, where the Print operations were included from
September 1, 2003. Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 21.0 million
euros, or 30%, from 70.6 million euros for the nine months ended
September 30, 2003 to 91.6 million euros for the nine months ended
September 30, 2004, mainly due to expenses at the 2003 Acquired
Operations and increased promotion expenses in connection with the
early launch of the fall schedule at our television stations.
Selling, general and administrative expenses expressed as a
percentage of net revenue were 18.3% and 19.6% for the nine months
ended September 30, 2003 and 2004, respectively. As our Radio
operations typically have relatively higher selling, general and
administrative expenses compared to our Television and Print
operations, the increase in expenses expressed as a percentage of
net revenue reflects the higher proportion of expenses related to
our Radio operations due to the 2003 Acquired Operations. Corporate
Expenses Corporate expenses increased 0.7 million euros, or 7%,
from 10.3 million euros for the nine months ended September 30,
2003 to 11.0 million euros for the nine months ended September 30,
2004, mainly due to an increase in corporate headcount. Corporate
expenses expressed as a percentage of net revenue were 2.7% and
2.4% for the nine months ended September 30, 2003 and 2004,
respectively. Non-cash Compensation Non-cash compensation increased
2.0 million euros from 0.5 million euros for the nine months ended
September 30, 2003 to 2.5 million euros for the nine months ended
September 30, 2004. The increase was mainly due to a compensation
charge of 1.3 million euros for the extension of the expiry date
for 250,000 stock options issued in 1994 to the Chairman of the
Company. Non-cash compensation expressed as a percentage of net
revenue was 0.1% and 0.5% for the nine months ended September 30,
2003 and 2004, respectively. Depreciation and Amortization Expenses
Depreciation and amortization expenses increased 3.6 million euros,
or 22%, from 16.7 million euros for the nine months ended September
30, 2003 to 20.3 million euros for the nine months ended September
30, 2004, mainly due to depreciation and amortization expenses
associated with our 2003 Acquired Operations. Depreciation and
amortization expenses expressed as a percentage of net revenue were
4.3% and 4.3% for the nine months ended September 30, 2003 and
2004, respectively. Operating Income Operating income increased
14.1 million euros, or 72%, from 19.6 million euros for the nine
months ended September 30, 2003 to 33.7 million euros for the nine
months ended September 30, 2004. Our Television operations had
increased operating income of 17.9 million euros, or 68%, from 26.4
million euros for the nine months ended September 30, 2003 to 44.3
million euros for the nine months ended September 30, 2004. The
improvement was mainly due to increased operating income at TV2 of
9.8 million euros, at VT4 of 5.0 million euros and at our Danish
Television operations of 2.5 million euros. Our Radio operations
had operating losses of 5.0 million euros for the nine months ended
September 30, 2004 compared to operating income of 3.3 million
euros for the nine months ended September 30, 2003, mainly due to
operating losses at the 2003 Acquired Operations and the decrease
in net revenue at our Danish Radio operations. Our Print operations
had operating income of 7.9 million euros. The increased income
from operations was partly reduced by increased corporate expenses
of 0.7 million euros, increased non-cash compensation of 2.0
million euros and increased depreciation and amortization of 3.6
million euros. Equity in Loss from Unconsolidated Subsidiaries
Equity in loss from unconsolidated subsidiaries decreased 2.7
million euros from 4.3 million euros for the nine months ended
September 30, 2003 to 1.6 million euros for the nine months ended
September 30, 2004, primarily related to our investment in prima
TV. The decrease was mainly attributable to the absence in 2004 of
a net loss of 3.3 million euros related to our investment in TVN
and TVN7 in Poland, which was sold in December 2003. Net Interest
Expense Net interest expense decreased 7.8 million euros, or 45%,
from 17.4 million euros for the nine months ended September 30,
2003 to 9.6 million euros for the nine months ended September 30,
2004. The decrease was mainly due to a 2.6 million euros reduction
in interest expense as a result of our redemption of the 7%
Convertible Subordinated Notes in December 2003, a 1.4 million
euros non-cash gain on an interest rate swap related to our Senior
Notes, a 0.7 million euros decrease due to the redemption of 31.0
million euros of our Senior Notes and 2.1 million euros higher
interest income. Foreign Exchange Gain Foreign exchange gain
decreased 6.3 million euros from 8.5 million euros for the nine
months ended September 30, 2003 to 2.2 million euros for the nine
months ended September 30, 2004. The decrease in foreign exchange
gain is mainly due to the absence of gains on our 7% Convertible
Subordinated Notes, which we redeemed in December 2003. Investment
Gain In the nine months ended September 30, 2003, we recorded net
investment gains of 30.1 million euros, mainly a non-cash
investment gain realized on our share of the transfer of 10% equity
interest in our Dutch Television operations as consideration for
the acquisition of our Print operations. In the nine months ended
September 30, 2004, we recorded a gain of 5.0 million euros
reflecting an increase in the fair value of our 1.7 million
warrants that are exercisable into common shares of Lions Gate
Entertainment Corp. until December 31, 2004 at an exercise price of
$5.00 per share. Gain (Loss) on Extinguishment of Debt In the nine
months ended September 30, 2003, we recorded a gain of 0.1 million
euros realized on the extinguishment of $5.0 million principal
amount of our 7% Convertible Subordinated Notes. In the nine months
ended September 30, 2004, we recorded a loss of 5.1 million euros
realized on the extinguishment of 31.0 million euros principal
amount of our Senior Notes. Other Expenses, Net Other expenses,
net, decreased 0.1 million euros, from 1.9 million euros for the
nine months ended September 30, 2003 to 1.8 million euros for the
nine months ended September 30, 2004. Income Taxes Income taxes
increased 5.2 million euros, from 3.3 million euros for the nine
months ended September 30, 2003 to 8.5 million euros for the nine
months ended September 30, 2004, mainly due to increased income
before taxes at our Dutch Print operations and at VT4 in Belgium.
Net Income As a result of the foregoing, our net income decreased
15.4 million euros from 27.6 million euros for the nine months
ended September 30, 2003 to 12.2 million euros for the nine months
ended September 30, 2004. Without the non- cash investment gain in
2003 on the Veronica transaction, the net income increased 14.8
million euros from a loss of 2.6 million euros for the nine months
ended September 30, 2003 to an income of 12.2 million euros for the
nine months ended September 30, 2004. Station Operating Cash Flow
"Station operating cash flow" is defined as operating income plus
corporate expenses, non-cash compensation, depreciation and
amortization expenses. We believe that station operating cash flow
is a metric widely used by the broadcasting industry as a measure
of operating effectiveness and is used by analysts who report
publicly on the performance of broadcasting companies. Station
operating cash flow is not meant to represent funds available for
debt service, dividends, reinvestment or other discretionary uses.
Station operating cash flow is not, and should not be used as, an
indicator of or an alternative to operating income, net income, or
cash flow from operations as reflected in our consolidated
financial statements and is not a measure of financial performance
under US GAAP. The following table reconciles operating income to
Adjusted EBITDA and station operating cash flow: Three months ended
Nine months ended September 30, September 30, 2003 2004 2003 2004
Operating income 2,311 euros 1,367 euros 19,613 euros 33,744 euros
Add: Non-cash compensation 507 1,540 507 2,554 Depreciation 3,367
2,991 10,739 9,374 Amortization 1,968 4,164 5,921 10,900 Adjusted
EBITDA 8,153 euros 10,062 euros 36,780 euros 56,572 euros Add:
Corporate expenses 3,762 4,114 10,313 11,017 Station operating cash
flow 11,915 euros 14,176 euros 47,093 euros 67,589 euros Station
operating cash flow increased 2.3 million euros from 11.9 million
euros for the three months ended September 30, 2003 to 14.2 million
euros for the three months ended September 30, 2004. The increase
was primarily attributable to increased station operating cash flow
at our Print operations of 2.5 million euros. For the nine months
ended September 30, 2004, station operating cash flow increased
20.5 million euros compared to the nine months ended September 30,
2003. The increase was primarily attributable to increased station
operating cash flow at our Television operations of 15.4 million
euros, and station operating cash flow at our Print operations of
11.1 million euros. The increase at our Television operations was
mainly attributable to improvements at TV2 of 9.5 million euros and
at VT4 of 4.8 million euros. Our Radio operations had decreased
station operating cash flow of 5.3 million euros, mainly due to
operating losses at the 2003 Acquired Operations and the decrease
in net revenue at our Danish Radio operations. Disclosure required
by the Indenture The following disclosure is required by the
indenture for our 12% Senior Notes, dated as of September 14, 2001,
and as amended July 13, 2001, between SBS Broadcasting S.A. and The
Bank of New York, as trustee ("the Indenture"). Twelve months ended
Twelve months ended September 30, 2003 September 30, 2004
Restricted Group adjusted EBITDA (1) (2) 72,622 euros 95,754 euros
Unrestricted Group adjusted EBITDA (1) (2) (7,972) (2,911)
Consolidated adjusted EBITDA (1) 64,650 euros 92,843 euros (1)
Adjusted EBITDA represents operating income before depreciation and
amortization expenses and non-cash compensation. Adjusted EBITDA is
not a measurement of operating performance calculated in accordance
with US GAAP and should not be considered a substitute for
operating income (loss), net income (loss), cash flows from
operating activities or other income statement data as determined
in accordance with US GAAP, or as a measure of profitability or
liquidity, and Adjusted EBITDA does not necessarily indicate
whether cash flow will be sufficient or available for cash
requirements. Adjusted EBITDA may not be indicative of our
historical operating results nor is it meant to be predictive of
potential future results. Because not all companies calculate
Adjusted EBITDA identically, the presentation of Adjusted EBITDA
may not be comparable to similarly titled measures of other
companies. (2) Unrestricted Group Adjusted EBITDA only includes the
adjusted EBITDA of our Unrestricted Subsidiaries (as defined in the
Indenture). Restricted Group Adjusted EBITDA only includes the
adjusted EBITDA of our Restricted Subsidiaries (as defined in the
indenture) that are consolidated and thus excludes the
unconsolidated subsidiary Ameron Srl. (prima TV in Romania). (3)
The following table reconciles operating income to Adjusted EBITDA:
Three months ended Twelve months ended September 30, September 30,
2003 2004 2003 2004 Operating income 2,311 euros 1,367 euros 39,217
euros 57,336 euros Add: Non-cash compensation 507 1,540 1,445 7,013
Depreciation 3,367 2,991 15,788 13,755 Amortization 1,968 4,164
8,200 14,739 Consolidated Adjusted EBITDA 8,153 euros 10,062 euros
64,650 euros 92,843 euros Cash Flow Cash provided by operations was
5.9 million euros for the nine months ended September 30, 2004,
compared to 27.2 million euros for the nine months ended September
30, 2003. The decrease was partly due to a 13.1 million euros
reduction in prepaid subscription fees within our Print operations,
and partly due to a 12.6 million euros decrease related to
prepayments for program rights, settlement of program right
payables and an increase of our program rights inventory. Cash used
in investing activities was 73.4 million euros for the nine months
ended September 30, 2004, compared to cash provided by investing
activities of 9.2 million euros for the nine months ended September
30, 2003. The increase was mainly due to the acquisition in 2004 of
the 49.3% minority interest in TV Norge (30.8 million), and the
cash settlement of the consideration for the acquisition of Radio 1
in Norway and Radio 2 in Denmark (18.6 million). Cash capital
expenditure increased 11.4 million euros from 11.6 million euros
for the nine months ended September 30, 2003 to 23.0 million euros
for the nine months ended September 30, 2004. The cash provided by
investing activities in 2003 was mainly due to the cash acquired
with the Print operations in a non-cash transaction and proceeds
from the sale of our investments in Lions Gate Entertainment Corp.
and BetandWin. Cash used in financing activities was 35.6 million
euros for the nine months ended September 30, 2004, compared to
10.4 million euros for the nine months ended September 30, 2003.
The change mainly reflects the acquisition and redemption of 31.0
million euros of our Senior Notes in the nine months ended
September 30, 2004 compared to the acquisition and redemption of
$5.0 million of the 7% Convertible Subordinated Notes in the nine
months ended September 30, 2003. As a result of the above, our cash
and cash equivalents decreased 103.4 million euros from 245.8
million euros at December 31, 2003 to 142.4 million euros at
September 30, 2004. Forward-Looking Statements Some of the
statements in this press release are forward-looking, including,
without limitation: (i) the statement that we are utilizing our
market knowledge and operating infrastructure to launch new
channels across our pan-European footprint and will operate
multiple stations in almost all of our markets by year-end; (ii)
the statement that by prudently building on our existing asset base
we are strategically positioning the Company to garner an increased
share of the overall advertising market and new revenue streams;
(iii) the statement that with a solid balance sheet and commitment
to profitability, we continue to explore accretive transactions in
television and radio that will complement our operations as the
Company continues to grow; (iv) the statements that we intend to
launch further co-branded digital music services in Finland, Sweden
and Norway before the end of the year, that such channels will be
the first music channels in these markets to be broadcast in their
respective local language, that the channels will utilize the
operating expertise and marketing resources provided by our
established television stations, as well as benefit from our
extensive music experience in operating our radio stations in these
markets and that we expect the digital channels to benefit from the
development of new revenue streams from subscriptions and
transactions resulting from viewers interactions with each channel
via SMS and phone lines, including actively selecting videos and
participating in chat forums, polls and games; (v) the statements
that our new Belgian television channel will be targeted to females
aged 20-49, that its schedule will be programmed to complement VT4
and that it will to a large extent utilize our existing sales,
marketing, technical and operating facilities in Flanders; (vi) the
statements that we expect the Greek Ministry will initiate a new
radio license tender in late 2004 or early 2005 and that the radio
stations whose licenses were annulled will be permitted to
broadcast until new licenses are awarded; and (vii) the statement
that we expect that Lampsi will participate in any new radio
license tender in accordance with applicable laws and regulations.
These forward-looking statements include statements relating to our
future performance, competition, trends and anticipated
developments in the television and radio broadcasting, and
publishing industry. In addition, we may make forward-looking
statements in future filings with the Securities and Exchange
Commission and in written material, press releases and oral
statements issued by us or on our behalf. Forward-looking
statements include statements regarding our intent, belief or
current expectations or those of our officers (including statements
preceded by, followed by or that include forward-looking
terminology such as "may," "will," "should," "believes," "expects,"
"anticipates," "estimates," "continues" or similar expressions or
comparable terminology) with respect to various matters. It is
important to note that our actual results in the future could
differ materially from those anticipated in these forward-looking
statements depending on various important factors. Some of these
factors include: the effects of, and changes in, regulation and
government policy; the effects of changes in general economic
environment; the effects of changes in the advertising spending
growth; the effects of competition; our ability to reduce costs;
the timely development and acceptance of our new channels, stations
and/or services; the effects of technological changes in
broadcasting technology; and, our success at managing the risks
that arise from these factors. All forward-looking statements in
this press release are based on information available to us on the
date hereof. We do not undertake to update any forward-looking
statements that may be made by us or on our behalf, in this press
release or otherwise. Conference Call The Company will host a
teleconference to discuss its results on Monday, November 1, 2004
at 10:00 (New York Time), which is 4:00 p.m. (Luxembourg Time). To
access the teleconference, please dial +1-973-321-1100 ten minutes
prior to the start time. The teleconference will also be available
via live web-cast on the Company's Web site, located at
http://www.sbsbroadcasting.com/. If you cannot listen to the
teleconference at its scheduled time, there will be a replay
available through November 8, 2004 that can be accessed by dialing
+1-877-519-4471 (U.S. callers) or +1-973-341-3080 (international
callers), pass-code 5167866. The web-cast will be archived on the
Company's Web site for two weeks. SBS is a European commercial
television and radio broadcasting company with operations in
Western and Central Europe. Countries where SBS currently has
broadcasting assets include: Belgium (Flanders), Denmark, Finland,
Greece, Hungary, The Netherlands, Norway, Romania, and Sweden. In
addition, SBS has publishing operations in The Netherlands. For
further information visit: http://www.sbsbroadcasting.com/. SBS
BROADCASTING SA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands of euro, except share and per share data) Three
months ended Nine months ended September 30, September 30, 2003
2004 2003 2004 Net revenue 115,228 euros 139,169 euros 385,810
euros 467,050 euros Operating expenses: Station operating expenses
78,784 93,336 268,073 307,887 Selling, general and administrative
expenses 24,529 31,657 70,644 91,574 Corporate expenses 3,762 4,114
10,313 11,017 Non-cash compensation 507 1,540 507 2,554
Depreciation 3,367 2,991 10,739 9,374 Amortization 1,968 4,164
5,921 10,900 Total operating expenses 112,917 137,802 366,197
433,306 Operating income 2,311 1,367 19,613 33,744 Equity in loss
from unconsolidated subsidiaries (6,536) (319) (4,320) (1,616)
Interest income 404 911 872 2,921 Interest expense (6,001) (3,337)
(18,286) (12,502) Foreign exchange gain 3,881 1,512 8,543 2,238
Investment gain 30,115 2,222 30,061 5,011 Gain (loss) on
extinguishments of debt -- (2,661) 109 (5,124) Other expense, net
(1,146) (408) (1,882) (1,780) Income (loss) before income taxes and
minority interest 23,028 (713) 34,710 22,892 Income taxes (931)
(1,448) (3,321) (8,481) Income (loss) before minority interest
22,097 (2,161) 31,389 14,411 Minority interest in (income) loss,
net (2,033) 155 (3,756) (2,193) Net income (loss) 20,064 euros
(2,006) euros 27,633 euros 12,218 euros Net income (loss) per
common share - basic: 0.70 euros (0.06) euros 0.97 euros 0.39 euros
Net income (loss) per common share - diluted: 0.67 euros (0.06)
euros 0.96 euros 0.37 euros Weighted average common shares - basic
28,621 31,311 28,618 31,175 Weighted average common shares -
diluted 31,561 31,311 28,674 33,264 SBS BROADCASTING SA
CONSOLIDATED BALANCE SHEETS (in thousands of euro) December 31,
September 30, ASSETS 2003 2004 Current assets: (unaudited) Cash and
cash equivalents 245,836 euros 142,427 euros Short-term investments
528 5,447 Accounts receivable trade, net of allowance for doubtful
accounts of 4,799 euros (4,990 euros in 2003) 95,533 90,666
Accounts receivable, affiliates 1,404 2,488 Restricted cash and
cash in escrow 1,853 2,555 Program rights inventory, current
102,880 123,907 Other current assets 18,149 25,716 Total current
assets 466,183 393,206 Buildings, improvements, technical and other
equipment, net of accumulated depreciation 35,581 39,083 Goodwill
149,480 161,780 Other intangible assets, net of accumulated
amortization 73,517 88,359 Program rights inventory, non-current
65,079 67,339 Deferred financing cost, net of accumulated
amortization 4,447 2,792 Investments in and advances to
unconsolidated subsidiaries 3,791 3,104 Other assets 1,200 940
Total assets 799,278 euros 756,603 euros LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable 34,537
euros 32,221 euros Accrued expenses 65,459 68,293 Program rights
payable, current 58,921 64,076 Income taxes payable 4,378 6,857
Current portion of long-term debt 3,328 3,207 Deferred income,
current 41,862 31,997 Other current liabilities 20,031 11,766 Total
current liabilities 228,516 218,417 Program rights payable,
non-current 31,190 28,355 12% senior notes due 2008 134,700 103,655
Other long-term debt 8,909 7,842 Deferred tax, non-current 27,440
35,532 Other non-current liabilities 29,405 7,321 Minority interest
61,051 53,847 Shareholders' equity: Common Shares (authorized
75,000,000 issued 31,451,092 (31,016,834 in 2003) at par value 2.00
euros) 62,034 62,902 Additional paid-in capital 669,835 678,094
Accumulated deficit (444,749) (432,531) Unearned compensation
(1,499) (1,494) Treasury shares (997 common shares) (28) (28)
Accumulated other comprehensive loss) (7,526) (5,309) Total
shareholders' equity 278,067 301,634 Total liabilities and
shareholders' equity 799,278 euros 756,603 euros SBS BROADCASTING
SA CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands
of euro) Nine months ended September 30, 2003 2004 Cash flows from
operating activities: Net income 27,633 euros 12,218 euros
Adjustments to reconcile net income to net cash provided by
operating activities: Revenue recorded in exchange for equity
investments (719) (916) Non-cash compensation 507 2,554
Depreciation and amortization 16,660 20,274 Equity in (income) loss
from unconsolidated subsidiaries 7,688 1,616 Non-cash interest
expense 1,143 729 Foreign exchange gain on long-term debt (5,661)
(110) Investment (gain) losses, net (29,772) (5,011) Loss (gain) on
extinguishments of debt (109) 5,124 Minority interest in income
3,756 2,193 Changes in operating assets and liabilities, net of
amounts acquired: Accounts receivable 1,136 5,821 Accounts
receivable, affiliates (343) (779) Program rights inventory, net
(7,271) (19,916) Other current assets (6,925) (4,831) Other
non-current assets (371) 192 Accounts payable and accrued expenses
14,901 (6,640) Deferred income (1,121) (9,045) Other liabilities
6,064 2,425 Cash provided by operating activities 27,196 5,898 Cash
flows from investing activities: Proceeds from sale of short-term
investments 9,372 -- Cash capital expenditure (11,638) (23,037)
Payment for purchase of acquired business, net of cash acquired
11,487 (50,337) Cash provided by (used in) investing activities
9,221 (73,374) Cash flows from financing activities: Net change in
short-term borrowings (1,175) -- Proceeds from issuance of common
shares -- 6,578 Net change in restricted cash and cash in escrow
(393) (685) Payment of long-term debt (8,755) (41,496) Payment of
capital lease obligation (112) -- Cash used in financing activities
(10,435) (35,603) Effect of exchange rate changes on cash and cash
equivalents (1,936) (330) Net change in cash and cash equivalents
24,046 (103,409) Cash and cash equivalents, beginning of period
67,026 245,836 Cash and cash equivalents, end of period 91,072
euros 142,427 euros SBS BROADCASTING SA OPERATING RESULTS BY
SEGMENT (UNAUDITED) (in thousands of euro) Three months ended Nine
months ended September 30, September 30, Television segment 2003
2004 2003 2004 Net revenue: TV Norge (in Norway) 9,883 euros 11,156
euros 36,142 euros 36,553 euros Kanal 5 (in Sweden) 16,358 17,392
58,953 60,776 TV Danmark and Kanal 5 (in Denmark) 8,670 10,449
28,919 31,689 VT4 (in Belgium) 9,525 11,675 35,341 43,108 SBS6,
NET5 and Veronica (in the Netherlands) 38,901 40,864 134,365
140,458 TV2 (in Hungary) 14,003 18,654 52,852 63,913 Broadcast Text
and other 2,502 1,271 3,644 3,713 Total net revenue 99,842 111,461
350,216 380,210 Station operating expenses 71,710 79,565 253,275
262,856 Selling, general and administrative expenses 18,566 21,785
56,084 61,069 Depreciation and amortization 4,529 4,008 14,418
11,976 Total operating expenses 94,805 105,358 323,777 335,901
Income from operations 5,037 euros 6,103 euros 26,439 euros 44,309
euros Radio segment Net revenue: Denmark 3,806 euros 2,286 euros
10,387 euros 7,990 euros Sweden 1,960 4,030 6,113 12,299 Norway 821
2,365 821 6,837 Finland 3,002 3,423 10,622 10,809 Greece 762 797
2,616 3,156 Total net revenue 10,351 12,901 30,559 41,091 Station
operating expenses 4,219 5,649 11,943 19,021 Selling, general and
administrative expenses 4,563 6,431 13,160 21,902 Depreciation and
amortization 766 2,033 2,202 5,096 Total operating expenses 9,548
14,113 27,305 46,019 Income (loss) from operations 803 euros
(1,212) euros 3,254 euros (4,928) euros Print segment Net revenue
5,035 euros 14,807 euros 5,035 euros 45,749 euros Station operating
expenses 2,855 8,122 2,855 26,010 Selling, general and
administrative expenses 1,400 3,441 1,400 8,603 Depreciation and
amortization 40 1,114 40 3,202 Total operating expenses 4,295
12,677 4,295 37,815 Income from operations 740 euros 2,130 euros
740 euros 7,934 euros Consolidated Net revenue: 115,228 euros
139,169 euros 385,810 euros 467,050 euros Income from operating
segments 6,580 7,021 30,433 47,315 Corporate expenses (3,762)
(4,114) (10,313) (11,017) Non-cash compensation (507) (1,540) (507)
(2,554) Operating income 2,311 euros 1,367 euros 19,613 euros
33,744 euros DATASOURCE: SBS Broadcasting SA CONTACT: Investors,
Michael Smargiassi of Brainerd Communicators, Inc.,
+1-212-986-6667, or ; or Press, Jeff Pryor of Pryor Associates,
+1-818-382-2233, or ; or Catriona Cockburn of Citigate Dewe
Rogerson, +44-207-282-2924, or , all for SBS Broadcasting SA Web
site: http://www.sbsbroadcasting.com/
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