MATV Matav-Cable Systems Media Ltd. ADS (MM)

NETANYA, Israel, November 21 /PRNewswire-FirstCall/ -- Matav-Cable Systems Media Ltd. (NASDAQ:MATV), a leading Israeli provider of digital cable television services, today reported third-quarter 2005 financial results. Revenues for the third-quarter reached NIS 134.4 million (US$29.2 million) compared with NIS 145.6 million (US$31.7 million) for the third quarter of 2004 and NIS 135.8 million (US$29.5 million) for the second quarter of 2005. During third-quarter 2005, the company's ARPU reached NIS 171 (monthly, not including 17% value-added tax) compared to NIS 178.9 in the third quarter of 2004 and NIS 172.6 in the second quarter of 2005. For the past few quarters the Company has succeeded in achieving lower churn and as of September 30, 2005, Matav had 250,700 subscribers, compared with 252,200 as of June 30, 2005 and 254,200 on March 31, 2005. Matav reported an increase in Internet subscribers reaching approximately 106,000 subscribers to date. Revenues for the nine-month period reached NIS 407.6 million (US$88.6 million) compared with NIS 444.1 million (US$96.6 million) in the comparable period in 2004. Third-quarter operating expenses increased to NIS 120.9 million (US$26.3 million) from NIS 112.5 million (US$24.5 million) in third-quarter 2004 and NIS 118.1 million (US$25.7 million) in the second quarter of 2005. The increase in operating expenses is due mainly to expenses related to the launch of new services such as VOD and the expansion of customer service operations. Operating expenses for the nine-month period totaled NIS 357.1 million (US$77.7 million) compared with 353.4 million (US$76.9 million) for the comparable period in 2004. Third-quarter gross profit totaled NIS 13.5 million (US$2.9 million) compared with NIS 33.1 million (US$7.2 million) for third-quarter 2004 and NIS 17.7 million (US$3.8 million) for the second-quarter of 2005. Gross profit for the nine-month period totaled NIS 50.5 million (US$11 million) compared with 90.8 million (US$19.7 million) for the comparable period in 2004. Third-quarter selling and marketing expenses totaled NIS 12.8 million (US$2.8 million), compared with NIS 18.7 million (US$4.1 million) for third-quarter 2004 and compared to NIS 13.3 million (US$2.9 million) for the second quarter of 2005 .The decrease compared to the year-ago-quarter is due to high S&M expenses associated with the launch of the HOT brand in the third quarter of 2004. Selling and marketing expenses for the nine-month period decreased to NIS 40.7 million (US$8.9 million) compared with 50.1 million (US$10.9 million) for the comparable period in 2004. Third-quarter G&A expenses reached NIS 10.7 million (US$2.3 million) compared with NIS 13.6 million (US$3 million) in third-quarter 2004 and NIS 10.5 million (US$ 2.3 million) for the second quarter of 2005. G&A expenses for the nine-month period totaled NIS 30.7 million (US$6.7 million), compared to NIS 34.1 million (US$7.4 million) for the comparable period in 2004. Third-quarter operating loss totaled NIS 10 million (US$2.2 million), compared with an operating profit of NIS 0.85 million (US$0.2 million) for third-quarter 2004, and an operating loss of NIS 6 million (US$1.3 million) for the second quarter of 2005. Operating loss for the nine-month period totaled NIS 20.9 million (US$4.5 million), compared with an operating profit of 6.6 million (US$1.4 million) for the comparable period in 2004. Third-quarter EBITDA reached NIS 23.9 million (US$5.2 million) compared with NIS 34.6 million (US$7.5 million) in third-quarter 2004 and NIS 25.8 million (US$5.6 million) in second quarter 2005. EBITDA for the nine-month period totaled NIS 77.6 million (US$16.9 million), compared with NIS 108.7 million (US$23.6 million) in the comparable period in 2004. Third-quarter financing expenses declined to NIS 11.1 million (US$2.4 million) from NIS 12 million (US$2.6 million) in the comparable quarter of 2004 and NIS 15.2 million (US$3.3 million) in the second quarter of 2005. The decrease compared to the previous quarter is attributed mainly to differences in exchange rates and CPI changes. Matav reported third-quarter net loss of NIS 22.1 million (US$4.8 million), or NIS 0.73 (US$0.16) per ordinary share, compared with a net loss of NIS 41.2 million (US$9 million), or NIS 1.40 (US$0.3) per ordinary share, for the third quarter of 2004. The year-ago quarter loss includes a one-time provision of approximately NIS 29 million (US$6.3 million). Net Income for the nine-month period reached NIS 110.2 million (US$24 million), or NIS 3.64 (US$0.79) per ordinary share, compared with a net loss of NIS 76.4 million (US$16.6 million), or NIS 2.60 (US$0.57), for the same period in 2004. The net income for the nine-month period in 2005 includes a gain of approximately NIS 170 million (US$37 million) from sales of Partner shares. Net cash used in operating activities in the third quarter totaled NIS 75.3 million (US$ 16.4 million) compared to net cash of NIS 41.5 million (US$9 million) provided by the Company in the comparable quarter in 2004. In the third quarter of 2005, Matav paid the tax authorities, NIS 106 million, as part of a settlement agreement reached concerning gains from sales of Partner shares. Net cash for the nine-month period used in operating activities totaled NIS 43.1 million (US$9.4 million) compared to NIS 98.5 million (US$21.4 million) provided by the company in the comparable period in 2004. Matav's financial results are not consolidated with Hot Telecom (Matav's telephony & corporate data joint partnership with the two other Israeli cable companies, 26.6% held by Matav). Hot Telecom's revenues in the third quarter reached NIS 22 million (US$4.8 million), as compared to NIS 11 million (US$2.4 million) for the second quarter of 2005. Matav's Chairman of the Board, Meir Srebernik, commented: "For the past few quarters we have succeeded in achieving lower churn and stabilized ARPU in our multi-channel television market. In addition, our new VOD service that was launched this year has turned out to be a success and we are witnessing increased demand for this new service. Still, our competitors' market-share strategy in the broadband Internet market has led to a continued decline in prices in this market and we have initiated retention plans and 'Triple-Play' offerings in order to retain and sign-in new subscribers. These steps have led to an increase of approximately 4,500 Internet subscribers in the last quarter. I am glad to note that in our telephony services we are succeeding in signing-in new subscribers as planned." "The Company, together with the other cable companies (Tevel Group and Golden Channels Group), is currently examining the possibility of performing a full legal merger between the Groups, based on the merger agreements which were initialled by the parties in the year 2003, while performing some changes resulting from the passage of time and the change of circumstances. According to the structure of the merger considered today, the Company, is intended to serve as the surviving company in the merger. The process of completing the full legal merger is still in the discussion stage, and there is no assurance that it shall be consummated." Management will conduct a teleconference tomorrow, November 22, 2005 at 10:00 a.m. U.S. Eastern Time. To participate, please dial +1-866-744-5399 in the United States and +972-3-9180609 internationally, several minutes prior to the start of the conference. Matav is one of Israel's three cable television providers, serving roughly 25 percent of the population. Matav's current investments include 1.2 percent of Partner Communications Ltd., a GSM mobile phone company and 10 percent of Barak I.T.C. (1995) Ltd., one of the three international telephony providers in Israel. (This press release contains forward-looking statements with respect to the Company's business, financial condition and results of operations. These forward-looking statements are based on the current expectations of the management of Matav Cable only, and are subject to risk and uncertainties, including but not limited to changes in technology and market requirements, decline in demand for the Company's products, inability to timely develop and introduce new technologies, products and applications, loss of market share and pressure on pricing resulting from competition, which could cause the actual results or performance of the Company to differ materially from those contemplated in such forward-looking statements. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. For a more detailed description of the risk and uncertainties affecting the Company, reference is made to the Company's reports filed from time to time with the Securities and Exchange Commission.) MATAV - CABLE SYSTEMS MEDIA LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) Convenience translation December September 31, September 30, 30, 2004 2004 2005 2005 AUDITED UNAUDITED UNAUDITED U.S. Reported NIS In thousands (1) dollars ASSETS CURRENT ASSETS: Cash and cash equivalents 24,250 10,277 85,915 18,685 Short-term deposit 50 - - - Trade receivables 75,458 81,765 81,354 17,693 Other accounts receivables 20,010 14,974 19,444 4229 Total current assets 119,768 107,016 186,713 40,607 INVESTMENTS AND LONG-TERM RECEIVABLES: Investments in affiliates 101,736 89,029 37,398 8,133 Investments in other company - - 19,278 4,193 Investment in limited partnerships 1,656 1,626 1,117 243 Rights to broadcast movies and programs 26,509 29,994 26,709 5,809 Other receivables 601 602 315 69 130,502 121,251 84,817 18,447 PROPERTY, PLANT AND EQUIPMENT: Cost 2,119,060 2,085,502 2,226,317 484,192 Less - accumulated depreciation 1,293,549 1,254,051 1,398,947 304,251 825,511 831,451 827,370 179,941 INTANGIBLE ASSETS AND DEFERRED CHARGES, NET 3,101 3,272 2,627 571 1,078,882 1,062,990 1,101,527 239,566 (1) Nominal financial reporting beginning January 1, 2004. MATAV - CABLE SYSTEMS MEDIA LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) Convenience translation December September 31, September 30, 30, 2004 2004 2005 2005 AUDITED UNAUDITED UNAUDITED U.S. Reported NIS In thousands (1) dollars LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Bank credit 465,339 430,909 553,256 120,326 Current maturities of debentures 34,005 34,107 34,206 7,439 Accounts payable and accruals: Trade 104,282 97,722 105,015 22,839 Jointly controlled entity - current accounts 18,112 15,274 10,852 2,360 Other accounts payable 201,943 208,632 108,277 23,549 Total current liabilities 823,681 786,644 811,606 176,513 LONG-TERM LIABILITIES: Loans and debentures (net of current maturities): Loans from banks and others 101,457 114,863 57,368 12,477 Debentures 33,201 33,182 - - Customers' deposits for converters, net of accumulated amortization 20,279 21,725 17,127 3,725 Accrued severance pay, net 2,483 2,208 3,234 703 Deferred taxes - - 4,252 925 Total long-term liabilities 157,420 171,978 81,981 17,830 Total liabilities 981,101 958,622 893,587 194,342 SHAREHOLDERS' EQUITY: Share capital 48,899 48,899 48,901 10,635 Additional paid-in capital 375,538 375,538 375,538 81,674 Accumulated deficit (326,656) (320,069) (216,499) (47,085) Total shareholders' equity 97,781 104,368 207,940 45,224 1,078,882 1,062,990 1,101,527 239,566 (1) Nominal financial reporting beginning January 1, 2004. MATAV - CABLE SYSTEMS MEDIA LTD. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share and per ADS data) Convenience translation Nine months Three months ended Nine months ended ended September 30, September 30, September 30, 2004 2005 2004 2005 2005 Reported NIS In thousands (1) U.S. dollars UNAUDITED UNAUDITED UNAUDITED UNAUDITED UNAUDITED Revenues 145,612 134,373 444,140 407,643 88,657 Operating expenses 112,479 120,911 353,383 357,123 77,669 Gross profit 33,133 13,462 90,757 50,520 10,988 Selling, marketing, general and administrative expenses: Selling and marketing 18,673 12,816 50,055 40,696 8,851 General and administrative 13,606 10,667 34,136 30,726 6,682 32,279 23,483 84,191 71,422 15,533 Operating income (loss) 854 (10,021) 6,566 (20,902) (4,545) Financial expenses, net (11,973) (11,144) (40,464) (38,156) (8,298) Other income (expenses), net (27,868) 73 (46,594) 163,577 35,576 Income (loss) before taxes on income (38,987) (21,092) (80,492) 104,519 22,733 Taxes on income 6,888 (1,506) 6,888 (7,359) (1,600) Income (loss) after taxes on income (45,875) (19,586) (87,380) 111,878 24,333 Equity in earnings (losses) of affiliates, net 4,724 (2,473) 10,983 (1,721) (374) Net income (loss) (41,151) (22,059) (76,397) 110,157 23,959 Net income (loss) per ordinary share (1.40) (0.73) (2.60) 3.64 0.79 Net income (loss) per ADS (2.80) (1.46) (5.20) 7.28 1.58 Weighted average number of shares outstanding in thousands 29,364 30,223 29,359 30,222 30,222 Weighted average number of ADSs outstanding in thousands 14,682 15,111 14,679 15,111 15,111 EBITDA calculation: Operating income (loss) 854 (10,021) 6,566 (20,902) (4,545) Net of the effect of proportional consolidation (640) (577) (2,937) (3,331) (724) Depreciation and amortization (including income from amortization of deposits for converters) 34,413 34,503 105,115 101,872 22,156 Memo EBITDA(*) - not including proportional consolidation 34,627 23,905 108,744 77,639 16,887 (1) Nominal financial reporting beginning January 1, 2004. (*) EBITDA is presented because it is a measure commonly used in the telecommunications industry and is presented solely in order to improve the understanding of the Company's operating results and to provide further a perspective regarding these results. EBITDA, however, should not be considered as an alternative to operating income or income for the year as an indicator of the operating performance of the Company. Similarly, EBITDA should not be considered as an alternative to cash flows from operating activities as a measure of liquidity. EBITDA is not a measure of financial performance under generally accepted accounting principles and may not be comparable to other similarly titled measures for other companies. EBITDA may not be indicative of the historic operating results of the Company. Nor is meant to be predictive of potential future results. Reconciliation between the operating profit in the financial statements and EBIDTA is presented in the attached summary financial statements. Contacts: Tal Peres, CFO Matav Cable Systems Telephone: +972-9-860-2221 Ayelet Shaked Shiloni Integrated IR Telephone US: +1-866-447-8633 / Israel: +972-3-635-6790 E-Mail: DATASOURCE: Matav-Cable Systems Media Ltd. CONTACT: Tal Peres, CFO, Matav Cable Systems, Telephone: +972-9-860-2221. Ayelet Shaked Shiloni, Integrated IR, Telephone US: +1-866-447-8633 / Israel: +972-3-635-6790, E-Mail:

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