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

NETANYA, Israel, March 16 /PRNewswire-FirstCall/ -- Matav-Cable Systems Media Ltd. (NASDAQ:MATV), a leading Israeli provider of digital cable television services, today reported fourth-quarter and full-year 2005 financial results. Revenues for the fourth-quarter reached NIS 135.3 million (US$29.4 million) compared with NIS 140.4 million (US$30.5 million) for the fourth quarter of 2004 and NIS 134.4 million (US$29.2 million) for the third quarter of 2005. During fourth-quarter 2005, the company's ARPU (Average Revenue Per User) reached NIS 172.6 (monthly, not including 17% value-added tax) compared to NIS 173.3 in the fourth quarter of 2004 and NIS 171 in the third quarter of 2005. The Company has succeeded in achieving stability in its multi-channel TV customer base, as compared to the previous quarter. As of December 31, 2005, Matav has approximately 251 thousands subscribers. Matav also achieved higher ARPU in the multi-channel TV segment in the fourth quarter, mostly due to higher demand for pay -per-view and "on-demand" content. Matav reported an increase in its Internet customer base reaching approximately 110 thousand subscribers as of December 31, 2005, along with lower ARPU due to the intense competition in this market segment. 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). In the fourth quarter of 2005, HOT Telecom's revenues reached NIS 27.9 million (US$6.1 million) compared with NIS 22 million (US$4.8 million) in the third quarter of 2005. Fourth-quarter operating expenses increased to NIS 124.4 million (US$27 million) from NIS 119 million (US$25.9 million) in the fourth quarter of 2004 and NIS 120.9 million (US$26.3 million) in the third quarter of 2005. The increase in operating expenses is due mainly to higher content expenses related to seasonality and higher expenses due to pay-per-view and "on-demand" content. This was partially off-set by a decrease in customer retention and set-top boxes expenses. Fourth-quarter gross profit totaled NIS 10.9 million (US$2.4 million) compared with NIS 21.3 million (US$4.6 million) for the fourth quarter of 2004 and NIS 13.5 million (US$2.9 million) for the third quarter of 2005. The decrease in gross profit, compared to the fourth quarter of 2004, is attributed to the decline in revenues as a result of subscribers' loss ,as well as an increase in operating expenses due to: the enhancement of the Company's service department, operating expenses related to the launch of new services, such as VOD, and an increase in content expenses. Fourth-quarter selling and marketing expenses totaled NIS 12.6 million (US$2.7 million), compared with NIS 13.6 million (US$3.0 million) for the fourth quarter of 2004 and compared to NIS 12.8 million (US$ 2.8 million) for the third quarter of 2005 Fourth-quarter G&A expenses reached NIS 11.4 million (US$2.5 million) compared with NIS 11.1 million (US$2.4 million) in the fourth quarter of 2004 and NIS 10.7 million (US$ 2.3 million) for the third quarter of 2005. Fourth-quarter operating loss totaled NIS 13.1 million (US$2.8 million), compared with an operating loss of NIS 3.4 million (US$0.7 million) for the fourth quarter of 2004, and an operating loss of NIS 10 million (US$2.2 million) for the third quarter of 2005. Fourth-quarter EBITDA reached NIS 21 million (15.6%) (US$4.6 million) compared with NIS 31 million (22.4%) (US$6.7 million) in the fourth quarter of 2004 and NIS 23.9 million(17.9%) (US$5.2 million) in the third quarter of 2005. Fourth-quarter financing expenses increased to NIS 12.5 million (US$2.7 million) from NIS 9.9 million (US$2.2 million) in the fourth quarter of 2004 and NIS 11.1 million (US$2.4 million) in the third quarter of 2005. The Company's financing expenses are influenced by the exchange rate between US dollar and Israeli shekel, the Israeli CPI ,and Prime interest rate. The Company reported other expenses for the fourth quarter of NIS 10 million (US$2.2 million). This is mostly due to allocation related to a revaluation of certain real-estate assets. Matav reported fourth-quarter net loss of NIS40.6 million (US$8.8 million), or NIS 1.34 (US$0.29) per ordinary share, compared with a net loss of NIS 6.6 million (US$1.4 million), or 0.22 (US$0.05) per ordinary share, for the fourth quarter of 2004 and 22.1 million (US$4.8 million) or NIS 0.73 (US$0.16) per ordinary share, for the third quarter of 2005. For the twelve-month results Revenues for the twelve-month period reached NIS 543 million (US$118 million) compared with NIS 584.6 million (US$127 million) for the comparable period in 2004. The decrease in revenues is mainly due to a revenue decline in the multi-channel TV segment (a 6.9% decrease). The revenues in this segment were influenced by a loss of subscribers and an ARPU decline. Revenues in the broadband Internet segment were influenced by a lower ARPU level. The number of subscribers in this segment increased. Hot Telecom's revenues in 2005 totaled NIS 67.6 million (US$14.7). Operating expenses for the twelve-month period totaled NIS 481.6 million (US$104.6 million) compared with 472.5 million (US$102.7 million) for the comparable period in 2004. The increase is mostly attributed to the enhancement of the Company's customer service departments as well as operating expenses related to the introduction of new services such as the VOD. Gross profit for the twelve-month period totaled NIS 61.4 million (US$13.3 million) compared with 112.1 million (US$24.4 million) for the comparable period in 2004. Selling and marketing expenses for the twelve-month period decreased to NIS 53.3 million (US$11.6 million) compared with 63.7 million (US$13.8 million) for the comparable period in 2004. The decrease is due to high advertising expenses associated with the launch of the HOT brand in 2004 along with higher marketing expenses related to the broadband Internet service. G&A expenses for the twelve-month period totaled NIS 42.1 million (US$9.1 million), compared to NIS 45 million (US$9.8 million) for the comparable period in 2004. Operating loss for the twelve month period totaled NIS 34 million (US$7.4 million), compared with an operating profit of 3.4 million (US$0.7 million) for the comparable period in 2004. EBITDA for the twelve-month period totaled NIS 98.5 million (18.3%) (US$21.4 million), compared with NIS 140 million (24.2%) (US$30.4 million) in the comparable period in 2004. Financing expenses for the twelve month period increased to NIS 50.6 million (US$11 million) from NIS 50.3 million (US$10.9 million) in the comparable period of 2004. Other income for the twelve-month period totaled NIS 153.5 million (US$33.3) compared with other expenses of NIS 42.7 million (US$9.3) for the comparable period in 2004. Other income for the year 2005 is mainly due to a capital gain in the amount of NIS164 million as a result of the sale of Partner shares, which was slightly off-set by the revaluation of certain real-estate assets. As of December 31, 2005, Matav still holds, through its fully owned subsidiary, Matav Investments Ltd., approximately 1.2% of Partner's outstanding shares, and therefore Matav's investment in Partner appears on a cost basis. Income from taxes for the twelve month period totaled NIS 6.7 million (US$1.5 million) compared with tax expenses of NIS 7.6 million (US$1.7 million) for the comparable period in 2004. Income from taxes in 2005 is mainly due to a settlement reached with the Israeli Tax Authorities during July 2005. According to the settlement, Matav recognized a portion of the gain from the sale of Partner shares, which was offset against Matav's carry-forward tax losses. As a result, Matav reported income from taxes of NIS 6 million in the second quarter of 2005. Matav's share in affiliated companies' losses for the twelve-month period was NIS 6 million (US$1.3 million) compared to a profit of NIS 14.3 million (US$3.1 million) in the comparable period in 2004. Matav's share in Hot Telecom's losses totaled NIS 10 million (US$2.2 million) in 2005. This was partially off-set by Matav's share in Partner Communications's earnings in the amount of NIS 5 million (US$1.1 million). In 2004, Matav incurred equity earnings of NIS 17 million due to Partner Communications, which was partially off-set by Hot Telecom's equity losses of NIS 3 million. The net income for the twelve-month period reached NIS 70 million (US$15.2 million) compared to a net loss of NIS 83 million (US$18 million) for the comparable period in 2004. Net cash for the twelve-month period used in operating activities totaled NIS 21.8 million (US$4.7 million) compared to NIS 121.3 million (US$26.4 million) provided by the company in the comparable period 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. In December 2005, Matav invested approximately NIS 28 million (US$6.1 million) in Barak's shares, as part of the restructuring plan between Barak, its debt holders, its shareholders and the banks. Matav and Clal Industries and Investments Ltd. signed an agreement according to which Matav will take part in cash contribution to Barak as part of the arrangement. As of December 31, 2005, Matav holds, through Matav Investments Ltd., approximately 18.5% of the issued share capital of Barak. 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 31, December 31, 2004 2005 2005 Audited Audited Reported (1) U.S. dollars NIS In thousands ASSETS: CURRENT ASSETS: Cash and cash equivalents 24,250 13,184 2,864 Short term deposit 50 27,196 5,909 Trade Receivables 75,458 74,699 16,228 Other accounts receivables 20,010 20,381 4,428 Total current assets 119,768 135,460 29,429 INVESTMENTS AND LONG-TERM RECEIVABLES: Investments in affiliates 101,736 79,040 17,171 Investment in other company - 19,278 4,188 Investment in limited partnerships 1,656 669 145 Rights to broadcast movies and programs 26,509 23,918 5,196 Other receivables 601 317 69 130,502 123,222 26,769 PROPERTY, PLANT AND EQUIPMENT: Cost 2,119,060 2,265,503 492,180 Less - accumulated depreciation 1,293,549 1,451,095 315,250 825,511 814,408 176,930 INTANGIBLE ASSETS AND DEFERRED CHARGES, NET 3,101 2,525 549 1,078,882 1,075,615 233,677 (1) Nominal financial reporting beginning January 1, 2004. MATAV - CABLE SYSTEMS MEDIA LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) Convenience translation December December 31, 31, 2004 2005 2005 Audited Audited Reported (1) U.S. dollars NIS In thousands LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Bank credit 465,339 551,742 119,866 Current maturities of debentures 34,005 34,596 7,516 Accounts payable and accruals: Trade 104,282 105,187 22,852 Jointly controlled entity 18,112 15,648 3,400 Other accounts payable 201,943 101,525 22,056 Total current liabilities 823,681 808,698 175,690 LONG-TERM LIABILITIES: Loans and debentures (net of current maturities): Loans from bank and others 101,457 75,464 16,395 Debentures 33,201 - - Deferred taxes - 4,695 1,020 Customers' deposits for converters, net of accumulated amortization 20,279 16,074 3,491 Accrued severance pay, net 2,483 3,327 723 Total long-term liabilities 157,420 99,560 21,629 Total liabilities 981,101 908,258 197,319 SHAREHOLDERS' EQUITY: Share capital 48,899 48,901 10,624 Additional paid-in capital 375,538 375,538 81,585 Accumulated deficit (326,656) (257,082) (55,851) Total shareholders' equity 97,781 167,357 36,358 1,078,882 1,075,615 233,677 (1) Nominal financial reporting beginning January 1, 2004. Convenience translation Three months ended Three months ended Year ended December December 31, December 31, 31, 2004 2005 2004 2005 2005 U.S. Reported (1) Reported (1) dollars Revenues 140,424 135,325 584,564 542,968 29,399 Operating expenses 119,105 124,437 472,488 481,560 27,034 Gross profit 21,319 10,888 112,076 61,408 2,365 Selling, marketing, general and administrative expenses: Selling and marketing 13,621 12,622 63,676 53,318 2,742 General and administrative (**)11,111 11,407 45,023(**) 42,133 2,478 24,732 24,029 108,699 95,451 5,220 Operating income (loss) (3,413) (13,141) 3,377 (34,043) (2,855) Financial expenses, net (9,869) (12,489) (50,333) 50,645) (2,713) Other income (expenses), net 3,914 (10,051) (42,680) 153,526 (2,184) Income (loss) before taxes on income (9,368) (35,681) (89,636) 68,838 (7,752) Taxes on income 537(**) 623 7,649(**) (6,736) 135 Net income (loss) after taxes on income (9,905) (36,304) (97,285) 75,574 (7,887) Equity in earnings (losses) of affiliates, net 3,318 (4,279) 14,301 (6,000) (930) Net income (loss) (6,587) (40,583) (82,984) 69,574 (8,817) Earnings (loss) per ordinary share (0.22) (1.34) (2.74) 2.30 (0.29) Earnings (loss) per ADS (0.44) (2.68) (5.48) 4.60 (0.58) Weighted average number of shares outstanding in thousands 29,364 30,223 29,360 30,222 30,223 Weighted average number of ADSs outstanding in thousands 14,682 15,111 14,680 15,111 15,111 EBITDA calculation: Operating income (loss) (3,413) (13,141) 3,377 (34,043) (2,855) Net of the effect of proportional consolidation 657 (798) (2,280) (4,130) (173) Depreciation and amortization (including income from amortization of deposits for converters) 33,800 34,800 138,915 136,672 7,560 Memo EBITDA(*) - not including proportional consolidation (**)31,044 20,861 140,012(**) 98,499 4,532 (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 soley in order to improve the understanding of the Company's operating results and to provide futher 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. (**) Reclassified. 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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