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ION Media Networks Reports First Quarter 2008 Financial Results
WEST PALM BEACH, Fla.-(Business Wire)-May 20, 2008 - ION Media Networks, Inc. (the "Company" or "ION") announced today its financial results for the quarter ended March 31, 2008.
ION's broadcast cash flow for the quarter ended March 31, 2008, decreased 55% to $13.1 million, down from $29.2 million in 2007. This decline is in line with Company's expectations for 2008, based on programming costs, operational investments, staffing, R&D and new initiatives needed to re-vitalize its nationwide TV network.
For the same period, free cash flow after capital expenditures and interest expenses was negative $13.5 million, compared to positive $2.4 million for the quarter ended March 31, 2007. The variance reflects the decrease in net revenues, working capital uses, and increased capital expenditures in the first quarter of 2008.
The broadcast industry is generally experiencing difficult market conditions, including the television infomercial category, which ION has significant exposure to until it is able to ramp up its entertainment programming expansion.
"Our 2008 budget involves increased programming, marketing and digital infrastructure investment to build our television network," said ION's Chairman and Chief Executive Officer Brandon Burgess. "At the same time, we are carefully balancing our transition investment with difficult market conditions."
In managing its financial flexibility, the Company elected to pay interest on its $405 million principal amount of Floating Rate Second Priority Senior Subordinated Notes for the three month interest period that commenced April 15, 2008 by increasing the principal amount of the outstanding Notes rather than in cash, which will reduce the Company's cash interest expenditures by approximately $9 million in the third quarter of 2008, net of the effects of the Company's existing interest rate swap arrangements. The Company expects to continue to use the pay-in-kind option on these notes in future quarters, until such time as market conditions improve.
About ION Media Networks
ION Media Networks, Inc. owns and operates the nation's largest broadcast television station group and ION Television, which reaches over 94 million U.S. television households via its nationwide broadcast television, cable and satellite distribution systems, and features popular TV series and movies from the award-winning libraries of RHI Entertainment, CBS Television, NBC Universal, Sony Pictures Television, Twentieth Television and Warner Bros., among others. Using its digital multicasting capability, the Company has launched several digital TV brands, including qubo, a channel for children focusing on literacy and values, and ION Life, a channel dedicated to active living and personal growth. It also has launched Open Mobile Ventures Corporation (OMVION), a business unit focused on the research and development of portable, mobile and out-of-home transmission technology using over-the-air digital television spectrum. For more information, visit www.ionmedia.com. -0- *T Selected Financial Results For the quarter ended March 31, ———————————————- 2008 2007 ——————— ———————— Net cash (used in) provided by operating activities $ (10,717) $ 3,141 Broadcast cash flow $ 13,071 $ 29,161 Free cash flow $ (13,477) $ 2,402 *T
Reconciliation of Non-GAAP Measures
The Company believes that net cash (used in) provided by operating activities is the financial measure calculated and presented in accordance with US generally accepted accounting principles ("GAAP") that is most directly comparable to Broadcast Cash Flow and Free Cash Flow. The Company's net cash used in operating activities was $10.7 million for the quarter ended March 31, 2008, compared to net cash provided by operating activities of $3.1 million for the quarter ended March 31, 2007.
The Company believes the presentation of Broadcast Cash Flow and Free Cash Flow is relevant and useful because these are metrics used by industry analysts and others in the financial community in evaluating the Company's operating performance. In addition, Broadcast Cash Flow is the primary indicator utilized by Company management in evaluating the Company's financial performance. In evaluating Broadcast Cash Flow and Free Cash Flow, investors should consider various factors, including the relationship of these metrics to the Company's reported cash flows from operating activities. Investors should be aware that Broadcast Cash Flow and Free Cash Flow may not be comparable to similarly titled measures presented by other companies and that such comparisons could be misleading unless all companies and analysts calculate such measures in the same manner. The use of Broadcast Cash Flow and Free Cash Flow is not intended to replace or supersede any information presented in accordance with GAAP.
The table below reconciles Broadcast Cash Flow and Free Cash Flow with net cash (used in) provided by operating activities, as derived from the Company's financial statements. -0- *T ION Media Networks Reconciliation of Non-GAAP Measures: (in thousands) For the quarter ended March 31, ———————————————- 2008 2007 ———————— ——————— Net cash (used in) provided by operating activities $ (10,717) $ 3,141 Less: Capital expenditures (2,760) (739) ———————— ——————— FREE CASH FLOW (13,477) 2,402 Less: Interest income (694) (485) Add back: Cash paid for interest 27,242 27,244 ———————— ——————— BROADCAST CASH FLOW $ 13,071 $ 29,161 ================ ============== *T
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