CIE REPORTS SECOND QUARTER 2004 RESULTS

Highlights:
Entertainment, Commercial and
Services Division revenues
increase 18%, 4% and 12%
respectively
Growth in entertainment revenues
was mainly driven by a strong
local and international live event
calendar in Argentina, Brazil and
Mexico
Adjustment in EBITDA margin
primarily due to the build-out of
Sports Books & Yaks
CIE inaugurates new children’s
outdoor attraction, Granja Las
Américas
Wannado™ “real-play” theme park
scheduled to open August 12,
2004
CIE REPORTS SECOND QUARTER 2004 RESULTS
Mexico City, July 27, 2004 - Corporación Interamericana de Entretenimiento,
S.A. de C.V. (“CIE”, “the Company” or “the Group” (BMV: CIE B), the leading outof-home entertainment company serving the Spanish- and Portuguese-speaking
markets in Latin America, Spain, and the U.S. Latin market, today announced its
consolidated financial and operating results for the second quarter of 2004,
ended on June 30, 2004.
Quarter vs. Quarter
2Q 2004
2Q 2003
1,933
1,672
15.6%
437
388
12.8%
22.6%
23.2%
EBITDA / Interest Expense Ratio
3.9x
3.7x
Comp. Cost of Financing
115
38
N.A.
95
115
(18%)
1H 2004
1H 2003
VAR %
3,541
3,107
14.0%
797
719
10.9%
22.5%
23.1%
EBITDA / Interest Expense Ratio
3.6x
3.5x
Comp. Cost of Financing
219
89
N.A.
Majority Net Result
164
178
(8%)
Revenues
EBITDA
EBITDA Margin
Majority Net Result
New corporate identity unveiled;
CIE to enhance brand recognition
across all markets
First Six Months vs. First Six Months
Revenues
EBITDA
EBITDA Margin
CIE CONTACTS:
Jaime J. Zevada
Director of Finance
VAR %
Juan Carlos Sotomayor
Investor Relations
Conrado M. Ramírez
Banking Communications
E: inversionistas@cie.com.mx
T: +52 (55) 5201-9000
EXTERNAL CONTACT:
Jesús Martinez
IR and PR Communications
E: jmrr@mcbridecorp.com
T: +52 (55) 5644-1247
NOTE: Figures appearing in this table and throughout the document are expressed in
millions of Mexican pesos of purchasing power as of June 30, 2004, unless otherwise
specified, and have been prepared in accordance with Mexican Generally Accepted
Accounting Principles (“Mexican GAAP”). Figures may differ due to rounding.
Second Quarter 2004
Results
Page 2
Discussion of Quarterly Results
(“The Period”)
REVENUES
Consolidated revenues in the second quarter of 2004 increased 15.6% to Ps. 1,933, compared to Ps. 1,672 in the
same quarter of 2003.
Quarterly Revenue by Division
Total: Ps.1,932
2Q 2004
2Q 2003
196
240
176
10%
10%
231
12%
14%
1,497
1,265
78%
Entertainment
76%
Services Commercial
Entertainment Division: Revenue totaled Ps. 1,497 in the quarter, 18% more than the Ps. 1,265
registered in the year ago period. (Operating Highlights contained in this document offer a more detailed
understanding of the events impacting quarterly results.)
This increase was principally driven by:
a. A strong schedule of live events in Argentina, Brazil and Mexico, including sold-out performances of
international recording artists such as Michael Bolton, Creedence Clearwater, Blink-182, Creamfields,
Festival Vive Latino, Yes, Chayanne South America Tour (in countries such as: Ecuador, Peru and
Venezuela) and others (see Operating Highlights). In addition, and when compared with the year ago
period, in which numerous concerts were postponed or cancelled due to the war in Iraq resulting in a
lower than usual revenue second quarter for 2003;
b. Three Broadway-type productions in Spain compared to one in the year ago period. Productions
during the quarter included Cats, Cabaret and Phantom of the Opera. The latter ended its 21–month
production run in the last week of the second quarter; and,
c.
1
1
The operation of the horse race track and its 28 Sports Books & Yaks units, compared to 19 in the
second quarter of 2003, in addition to an increase in local and international exhibitions at Centro
Banamex, from 13 expos in 2003, to 19 in 2004.
Sports Books & Yaks is a network of sites that feature off-track betting and numbers-based games, respectively,
and are developed and operated by CIE.
Second Quarter 2004
Results
Page 3
Commercial Division: Revenue in the second quarter registered an increase of 4%, reaching Ps. 240,
compared with Ps. 231 in the same period of 2003. This increase is primarily due to a greater number of
billboard advertisements on pedestrian overpasses. In the current quarter, 667 ads were featured, a 43%
increase over the 467 in the second quarter of 2003.
Higher Commercial performance was partially offset by the lower contribution of revenues from rotational
and static advertising at soccer fields in Mexico. The Company is reorganizing its business model on
more profitable clients and teams.
Services Division: Revenue totaled Ps. 196 in the quarter, in comparison with the Ps. 176 recorded in
the same period of 2003. The 11% increase is mainly attributable to a higher number of tickets sold for
own live events in Mexico and South America, despite a slight decrease in the volume of tickets sold for
third party venues and live events affiliates in Mexico during the quarter, in comparison to the same
period of the previous year.
GROSS PROFIT
Gross profit for the quarter reached Ps. 722, 13% greater than the Ps. 636 recorded in the same period of
2003. The gross margin of 37.4% was 70 basis points lower that 38.0% gross margin registered in the
second quarter of 2003, primarily as a result of the recently added Sports Books & Yaks units that have
not yet reached full revenue-generating capacity.
EBITDA
The Group recorded EBITDA (“earnings before interest, taxes, depreciation and amortization”) of Ps. 437,
a 12.7% increase over the Ps. 388 of 2003. EBITDA margin for the period was 22.6%, a decline of 57
basis points from the 23.2% margin recorded in 2003.
The temporary adjustment in EBITDA margin resulted primarily from the addition of new Sports Books &
Yaks units, an effect that shall remain while new units start-up and approach maturity. However, as units
reach their full revenue-generating capacity, the proportionate impact of a greater number of mature units
should compensate for this short-term temporary affect on EBITDA margin.
As of June 30, 2004 CIE had opened 28 of the 45 shops in the country for which it holds licenses. In the
next six months, the Company plans to open between five and seven additional units, which will continue
to weigh on EBITDA margins as previously expected and stated by the Company.
OPERATING INCOME
Income from operations was Ps. 311 versus Ps. 273 for the same quarter a year ago, an increase of
14%. Operating margin for the quarter was 16.1%, 21 basis points lower than the 16.3% operating
margin recorded in the second quarter of 2003.
The decrease in operating margin is due to a greater level of depreciation and amortization, which
increased 10% from Ps. 115 in the second quarter of 2003 to Ps. 126 in the current period, reflecting a
higher base of fixed assets. EBIT margin was also affected by the lower EBITDA contribution.
COMPREHENSIVE COST OF FINANCING (“CCF”)
The following table compares the CCF for the three months ended June 30, 2004 with that of the year
ago period.
Second Quarter 2004
Results
Page 4
2Q 2004
2Q 2003
VAR %
111
104
6.9%
7
12
(42.4)%
(11)
64
N.A.
-
10
(101.7)%
115
38
205.1%
Interest Expense
Interest Income
Foreign Exchange (Gain) Loss – Net
Monetary Position (Gain) Loss
Total
The Company recorded Ps. 115 as CCF in the second quarter of the year, in comparison to the Ps. 38
registered in the same period of 2003. This increase was the combined effect of:
a. A Ps. 11 net foreign exchange loss recorded in the 2004 period as a result of the peso
devaluation, compared with the Ps. 64 gain in the same period last year; and,
b. An increase of 13% or Ps. 12 in net interest expense, from Ps. 92 in the year ago period, to Ps.
104 in the current quarter:
• A 42% reduction in interest income, totaling Ps. 7 in the 2004 period, as compared with
Ps. 12 in the prior year, explained by a lower level of cash and cash equivalents; and,
• Higher interest expense in the current quarter, totaling Ps.111, in comparison to the Ps.
104 in the second quarter of 2003, mainly due to a higher level of debt.
However and partially offsetting these increases, the Company recorded a marginal monetary position
gain during the period, in comparison with a Ps. 10 monetary loss during the second quarter of 2003.
Debt as of June 30, 2004
Total: $4,881
DENOMINATION
MATURITIES
US Dollars
(3%)
UDIs
(44%)
Long Term
(81%)
Short Term
(19%)
Mexican Pesos
(53%)
OTHER EXPENSES
During the quarter, the Company recorded a Ps. 40 non-cash charge as other expenses, as it entered
into the restructuring of the rotational advertising business model, based on a profitability per-client and
per-team analysis conducted after the first football season of 2004. The Company intends to reorganize
its strategy in two dimensions (i) its advertising selling process and (ii) the acquisition of future exclusive
rights of football teams.
PROVISIONS FOR TAXES
Second Quarter 2004
Results
Page 5
CIE recorded Ps. 62 in tax provisions during the current period, compared to Ps. 91 in the second quarter
of 2003.
MAJORITY NET RESULT
The Company registered a majority net result of Ps. 95 in the second quarter of the year, in comparison
to a majority net result of Ps. 115 recorded in the same period of 2003. The majority net result of this
period was principally affected by the non-cash charge resulting from the restructuring of the rotational
advertising business as previously stated.
DISCUSSION OF FIRST HALF RESULTS
(“the period”)
REVENUES
CIE recorded revenues of Ps. 3,541 for the period, a figure that favorably compares to Ps. 3,107 reached
in the same period of last year. This 14% increase is mainly attributable to the following:
a. The growth in the number of live events due to a strong international and local event calendar in
Argentina, Brazil and Mexico, which had been impacted in the year ago period by the Iraq war;
b. A total of 28 Sports Books & Yaks throughout Mexico, in comparison to 19 in the same period last
year, in addition to an increased number of local and international exhibitions at Centro Banamex;
and,
c.
Strong theatrical performances in Spain, particularly the 21 month-run of Phantom of the Opera,
which ended during the first half of 2004, as well as Cats and Cabaret.
The following table compares divisional revenues as a percentage of total for the first half of 2004 and
2003:
First Half Revenue by Division
1H 2004
2004 Total: Ps.3,541
1H 2003
372
464
333
11%
11%
426
13%
14%
2,704
2,349
76%
Entertainment
75%
Services Commercial
Second Quarter 2004
Results
Page 6
GROSS PROFIT
Gross profit increased 11% in the first half of 2004, from Ps. 1,183 to Ps. 1,319. This increase was primarily due
to the aforementioned 14% revenue increase. Gross margin adjusted 82 basis points to 37.3%, as compared with
the 38.1% gross margin registered in the same period of 2003. This adjustment was the result of a higher cost of
sales as percentage of revenues during the period, in comparison with the same period in 2003 primarily as a
result of the recently added Sports Books & Yaks units that have not yet reached full revenue-generating
capacity.
EBITDA
The Group recorded EBITDA of Ps. 797, compared to Ps. 719 for the first half of 2003, an increase of 11%.
Similarly, EBITDA margin for the first half of 2004 was 22.5%, compared to the 23.1% achieved in the first six
months of 2003. The 61 basis point adjustment in EBITDA margin is a result of higher operating expenses as a
percentage of revenues related to the opening of additional Books & Yaks. As mentioned previously, the
proportionate impact of a greater number of mature units should compensate for this short-term temporary effect.
OPERATING INCOME
Income from operations was Ps. 545 versus Ps. 498 for the same period a year ago, an increase of 9%.
Operating margin for the period was 15.4%, 64 basis points lower than the 16.0% operating margin recorded in
the first half of 2003.
The decrease in operating margin is due to a greater level of depreciation and amortization, which increased 14%
from Ps. 220 in the first half of 2003 to Ps. 252 in the period, reflecting a higher base of fixed and deferred assets.
To a lesser extent EBIT margin was also affected by a lower contribution in EBITDA.
CCF
CCF in the period was Ps. 219 in comparison to Ps. 89 registered in the first six months of 2003 reflecting a 145%
increase. This increase is fundamentally attributable to:
A change in the net foreign exchange result, which went from a net gain of Ps. 116 in the first six months
of 2003, to a net loss of Ps. 14 in the same period of 2004; and,
An increase of 15% in net interest expense which went from Ps. 182 in 2003, to Ps. 209 in the first half of
2004. This adjustment is principally the result of the increase in interest expense, which rose from Ps.
205 in the first six months of 2003 to Ps. 223 in 2004, attributed to the increase in debt by the Company.
However and partially offsetting these increases, the Company recorded Ps.4 as net monetary gain during the
period, in comparison with a Ps.24 loss in the first six months of 2003.
TAXES
CIE made a tax provision of Ps. 123 during the period, lower than the tax provision of Ps. 168 made in 2003.
MAJORITY NET INCOME
Majority net income for the first half was Ps. 164, an 8% decrease over the Ps. 178 reported in the first half of
2003.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided resources of Ps. 326, which resulted mainly from a consolidated net result,
depreciation and amortization and resources generated through working capital.
Second Quarter 2004
Results
Page 7
Liquidity and Capital Resources (in millions of pesos)
June 30, 2004
Resources Provided by Operating Activities and Working Capital
326
CAPEX
(384)
Investments in Deferred Assets
(100)
Free Cash Flow
(158)
Financing Activities
109
Cash and Cash Equivalents at Start of Quarter
693
Cash and Cash Equivalents at End of Quarter
641
CIE utilized Ps. 384 in capital expenditures, including:
a. The continued development of Sports Books & Yaks throughout the country, the Company opened
three units during the quarter. During the year the Company expects to open between 5-7 additional
units, currently under construction;
b. Final and more intensive stages of development of the Wannado City™ children’s project at
Sawgrass Mills Mall in Florida, which is scheduled to open in August 2004;
c.
Concession rights for the operation and build-out of overpasses in Guadalajara, Jalisco,
Aguascalientes, Aguascalientes and Cuernavaca, Morelos, in Mexico;
d. The final completion stage of Granja Las Américas which is already open to the public;
e. Acquisition of the 50% of Monterrey CART race held in April;
f.
Revamping and maintenance of amusement parks; and,
g. Maintenance capex for several of CIE’s venues.
Investments in deferred assets of Ps. 100 included:
a. Key moneys and pre-operating expenses for the opening of Sports Books & Yaks; and,
b. Other rights for several types of live entertainment content.
OPERATING HIGHLIGHTS FROM THE QUARTER
Second Quarter 2004
Results
Page 8
Music Events: The strong lineup of music events continued in the second quarter after the Iraq war led
numerous artists to cancel and postpone their engagements in 2003. Concerts and artists presented in
the second quarter of the year included:
Mexico: Blink-182, Creamfields, Creedence Clearwater Revisited, Eros Ramazzotti, Michael Bolton,
Yes, MTV Movie Awards, MTV Fashionista, La Ley, Chayanne Tour, Hombres G, Miguel Bose, Vive
Latino 2004, HA-ASH, Dos Chicos de Cuidado, Belinda, Joan Sebastian, Alegrijes y Rebujos, Holiday
on Ice and others.
Argentina: Babasonicos, La Renga, Los Piojos, Intoxicados, Almafuerte, Bersuit, Decadentes and
Rosario Flores.
Brazil: Maria Rita, Eros Ramazzotti, Jorge Aragao, Maroon 5, Dimmu Borginr, Zeca Pagodinho,
Alcione, Los Hermanos, Circo Imperial, Kataklo, Dulce Pontes, Jorge Vercilo, Dejavú, Pitty,
Emmerson Nogueira, Chivas Jazz Festival, Flávio Venturini, The Lemmonheads, Mumma Schanz,
Moonspell, Luciana Mello, Detonautas, Gal Costa, Jota Quest, Lulus Santos, Alex Cohen, Ed Motta,
Frejat and others.
Special and Corporate Events: CIE produced various special and corporate events in the Mexican
market on behalf of numerous companies and brands, including Purina, Toyota, Banamex, ChryslerJeep-Dodge, Chrysler-Mercedes Benz, Wells Fargo, Sony, Pioneer, Phillips, Reto Corona, Vida TV,
Aetna and many others.
Motor Sports: The Champ Car World Series, formerly known as the CART Series, took place on May 23,
2004 whereas in 2003 the Monterrey races took place in the first quarter; attendance exceeded 210,000
spectators. The Company is preparing for the third installment in Mexico City, which is planned for
November 5-7, 2004.
The Company is seeing positive results from its new motor sporting event Corona Challenge (Desafio
Corona). The 8-city stock car circuit race has been well attended and the Company will continue to
produce this event during the next two quarters, with the final leg ending in December of 2004.
Theatrical Productions: During the quarter, the Company’s Broadway-type productions included Les
Misérables in Mexico City; and Phantom of the Opera, Cats and Cabaret in Madrid. In Brazil, Chicago
premiered during the quarter while Phantom of the Opera culminated its successful performance in late
June. The Company plans to replace this production with Mamma Mia! in November of this year.
Smaller productions of The Vagina Monologues, The Complete Abbreviated Works of William
Shakespeare, Las Viejas Vienen Marchando, Proof and Todos Tenemos Problemas Sexuales continued
their performances in Mexico City. Similarly in Brazil, smaller productions included, A Flor do Meu Bem
Querer.
Amusement Parks: Wannado City™, designated the first “real-play park,” is preparing to debut a
140,000-square-foot venue at The Mills Corporation’s Sawgrass Mills in South Florida the second week of
August. Aimed at 4 to 11 year olds, Wannado City recreates all the sites of a major city from the point of
view of its “kidizens”. Inside the city, attractions offer 250 career possibilities, each designed to allow role
playing or “real-play” decision making and responsibility.
Las Americas Horse Racetrack - During the first six months of the year, 727 horse races took place at
Mexico City’s Las Americas horse race track, 3% less than the 751 races recorded in the same period of
2003. The 73 racing days scheduled in the period, a decrease from the prior year, reflect the change in
the 2004 racing season in which Thursday races were eliminated.
Second Quarter 2004
Results
Page 9
Centro Banamex – During the quarter Centro Banamex successfully hosted 19 expos. These included:
Integra 2004 Expo Mega Health, Expo Seguridad 2004, Festival de la Palabra Cd. De México, Expo
Recursos Humanos, Expo Publicitas 2004, Encuentro Aeronáutico, Expo Golf, Expo Management and
many others at Centro Banamex’s 34,000 square meters of exhibition space. Centro Banamex currently
has 20 expos planned for the remainder of the year.
Pedestrian Overpasses - As of June 30, 2004, CIE had installed over 667 advertising announcements
on 182 overpasses, compared with 467 advertisements placed on 123 overpasses in the second quarter
of last year.
* * * * *
ABOUT CIE
With its origins in 1990, Corporación Interamericana de Entretenimiento, S.A. de C.V. (“CIE”) is today the
leading out-of-home entertainment company serving the Spanish- and Portuguese-speaking markets in
Latin America, Spain and the United States of America. Through a unique vertical integration structure,
the Company participates in numerous businesses that provide recreational and entertainment services
and products.
These services and products primarily include: the operation of entertainment venues and amusement
parks, the promotion and organization of diverse live events, trade fairs and exhibitions, the marketing of
advertising sponsorships, and the sale of entrance tickets, food, beverages and souvenirs at public
events and venues. The Company also participates in the film industry through the production and
distribution of films and operates leading radio broadcasting stations in Buenos Aires, Argentina.
Since 1995, CIE’s shares have trades on the Mexican Stock Exchange (BMV) under the
ticker symbol “CIE B”.
NOTE: Except for the historic information here provided, statements included in this document regarding
the Company's business outlook and anticipated financial/operating results or regarding the Company's
growth potential, constitute forward-looking statements and are based on management expectations
regarding the economic and business conditions in Mexico and the countries where CIE operates as well
as the fluctuation of the Mexican peso compared to the U.S. dollar and/or other currencies.
The use of registered trademarks and commercial trademarks within this document are exclusively for
illustrative purposes and are not meant to violate the rights of the creators and/or intellectual property
laws applicable in the countries in which CIE, its subsidiaries, and those companies with which CIE
maintains commercial or business relationships, operate.
(Financial statements to follow)
Second Quarter 2004
Results
Page 10
Second Quarter 2004
Results
Page 11
Second Quarter 2004
Results
Page 12