CTC MEDIA REPORTS THIRD QUARTER 2008 FINANCIAL RESULTS

30.10.2008
Moscow, Russia – October 30, 2008 – CTC Media, Inc. (NASDAQ: CTCM), Russia's leading independent media company, today reported financial results for the three- and nine-month periods ended September 30, 2008.

- Consolidated Revenues Increase 52.3% to $143.3 Million -
- OIBDA* Increases 72.2% to $55.0 Million -
- Net Income Increases 20.5% $21.0 Million -

- $0.13 Earnings Per Share-

US$ 000’s, except per share data

Three months ended
September 30,




Nine months ended
September 30,



 

2007

2008


Change 


2007

2008


Change 

 
 
 
 
 
 
 
 
 
 

Total operating revenues

$94,084

$143,307

 

52.3%

 

$310,352

$452,823

 

45.9%

Total operating expenses

(69,674)

(92,222) 

 

32.4%

 

(202,132)

(278,671) 

 

37.9%

 
 
 
 
 
 
 
 
 
 

OIBDA*

31,960

55,030

 

72.2%

 

127,670

183,706

 

43.9%

 
 
 
 
 
 
 
 
 
 

Net income

$17,399

$20,969,

 

20.5%

 

$76,214

$111,498

 

46.3%

Earnings per share

$0.11

$0.13

 

18.2%

 

$0.48

$0.70

 

45.8%

*OIBDA is defined as operating income before depreciation and amortization (exclusive of amortization of programming rights and sublicensing rights). OIBDA is a non-GAAP financial measure. Please refer to    Attachment A for a reconciliation of OIBDA to net income.

Financial Highlights

• Consolidated revenues increased 52% to $143.3 million in the third quarter and 46% to $452.8 million in the first nine months of 2008
• OIBDA increased 72% to $55.0 million in the third quarter and 44% to $183.7 million in the first nine months of 2008
• Net income increased 20.5% to $21.0 million in the third quarter and 46% to $111.5 million in the first nine months of 2008
• $0.13 and $0.70 fully diluted earnings per share for the three- and nine-month periods ended September 30, 2008, respectively

Corporate Highlights
 
• Strong start of fall programming season at CTC channel
• Channel 31 continued to grow audience share and remained the second most watched channel in Kazakhstan
• Vyacheslav Murugov appointed Chief Content Officer of CTC Media
• CTC Media won nine prestigious Russian Television Academy awards
• In October, CТС Мedia completed the acquisition of a 51% interest in the broadcasting group Teledixi SRL and Muzic Ramil SRL in Moldova for $4.1 million in cash**

** The acquisitions of Teledixi SRL and Muzic Ramil SRL were completed on October 1, 2008. CTC Media will begin consolidating these companies in the fourth quarter of 2008.

Anton Kudryashov, Chief Executive Officer of CTC Media, commented, “We are extremely pleased with our financial results for the third quarter of 2008, which exemplify CTC Media’s continued success. Our advertising revenues increased by 54.8% and OIBDA margin increased by 4.4% in the quarter.”

“The beginning of the fall TV season on our flagship CTC channel is off to a terrific start, once again proving CTC’s ability to connect with Russian viewers. In September, CTC’s audience share for all viewers age 4+ averaged 9.9% on weekdays (Monday – Thursday) and averaged 9.3% on weekend (Friday – Sunday). Further, audience share in the channel’s target demographic, viewers aged 6 to 54, was an impressive 13.4% on weekdays and 11.8% on weekends, in September. This success is mainly attributed to the launch of sequels of several proven shows, many of which are CTC Media in-house productions. These include Ranetki and Daddy’s Girls, both prime-time shows that have proven to be extremely successful with our target audience. Daddy’s Girls ratings were exceptionally impressive in September, with the sitcom’s average audience share in CTC’s target demographic on weekdays delivering a 22.8%.”

“We continue to make significant progress in our CIS markets. Channel 31 in Kazakhstan, which started broadcasting in CTC format on March 31, 2008, is currently the second most watched station in both its general and target demographics. We continue to execute on our expansion strategy and, in October, we entered Moldova, a country with a developing economy and great potential for future growth in its TV and advertising market.”

“While we are very pleased with our third quarter results, we are concerned about the current unfavorable macroeconomic outlook in Russia and the potentially negative consequences that outlook may have on the advertising market. The current industry forecast for the Russian television advertising market for 2009 is likely to be updated and it is reasonable to anticipate it will be revised downwards. We believe that CTC Media is well positioned to withstand challenging market conditions and as the visibility for the next year improves we will adjust our strategy, operations and costs accordingly.”  

Target Audience Shares for the Three Months and Nine Months Ended September 30, 2007 and 2008

 


Average Audience Shares, %

 


Q3 2007

 


Q3 2008

 


9M 2007

 


9M 2008

CTC Network

 


 


 


 


 


 


 


•  target demographic (all aged 6-54)

10.9

 


12.0

 


11.2

 


11.7

Domashny Network

 


 


 


 


 


 


 


•  target demographic (females aged 25-60)

2.3

 


2.8

 


2.3

 


2.8

DTV Network

 


 


 


 


 


 


 


•  target demographic (all aged 18+)

1.8

 


1.8

 


1.9

 


1.8

Channel 31

 


 


 


 


 


 


 


•  target demographic (all aged 6-54)***

8.7

 


16.6

 


N/A

 


12.3

***Audience share data for 9M 2007 N/A due to absence of portable people meter measurements in Kazakhstan prior to July 2007

Results for the Three Months Ended September 30, 2008

US$ million

Organic Results****

 

 


Non-Organic Results*****

 


Total CTC Media Group

Revenues

127.8

 


15.5

 


143.3

OIBDA

51.3

 


3.7

 


55.0

OIBDA margin

40.1%

 


23.9%

 


38.4%

Net Income

20.6

 


0.4

 


21.0

****Organic results include combined results of operations of CTC Network, Domashny Network, CTC Television Station Group, Domashny Television Station Group and Corporate Office
***** Non-organic results include results of operations of recent acquisitions: Production Group (Soho Media and Costafilm production companies), DTV Group and CIS Group (Channel 31 Group)

CTC Media's total operating revenues for the three months ended September 30, 2008 increased 52.3% to $143.3 million from $94.1 million for the three months ended September 30, 2007. The increase in revenues reflects the continued growth of the Russian television advertising market and higher advertising rates, as well as the impact of acquisitions, primarily of the DTV Group acquired in the second quarter of 2008, Channel 31 in Kazakhstan acquired in the first quarter of 2008, and several regional stations acquired in 2007. In part by a decrease in the amount of advertising permitted to be broadcast under Russian law effective January 1, 2008. Although the Russian ruble has been generally depreciating against the US dollar since August 2008, the company estimates that the appreciation of the Russian ruble against the US dollar in the three months ended September 30, 2008 as compared to the same period in 2007 resulted in an approximate 4.2% increase in total operating revenues

CTC Media’s organic operating revenues, which include combined operating revenues of CTC Network, Domashny Network, CTC Television Station Group and Domashny Television Station Group, increased 35.8% to $127.8 million in the third quarter of 2008 from $94.1 million in the third quarter of 2007.

CTC Media’s non-organic revenues, which include combined operating revenues from the DTV Group, the CIS Group, and its Soho Media and Costafilm production companies, was $15.5 million in the third quarter of 2008. Out of these revenues, the DTV Group contributed $11.7 million, the CIS Group (Channel 31) contributed $3.6 million, and production companies contributed $0.2 million.

Consolidated total operating expenses in the third quarter of 2008 increased 32.4%, to $92.2 million compared to $69.7 million in the third quarter of 2007. Total operating expenses grew more slowly than revenue, primarily reflecting sound cost control, including control over programming rights, which is CTC Media’s most significant cost item. The main drivers for the operating expenses growth in absolute terms were:

Direct operating expenses in the quarter increased from $4.7 million to $8.8 million primarily due to the acquisition of the DTV Group ($2.1 million), acquisition of the CIS Group ($0.7 million) and increased transmission and maintenance costs at our Domashny and CTC owned-and-operated stations ($0.7 million).

Selling, general and administrative expenses in the quarter increased from $19.6 million to $30.0 million primarily due to the acquisitions of the DTV Group ($2.0 million), an interest in the Channel 31 Group ($2.2 million) and two production companies, Costafilm and Soho Media ($1.6 million), as well as increases in salaries and benefits and increases in headcount. Corporate stock-based compensation expense increased $1.7 million to $5.0 million for the three months ended September 30, 2008 compared to the year-ago period.

Amortization of programming rights expense in the quarter increased 31.1% from $36.6 million to $48.0 million. The increase was primarily driven by:
•  higher programming costs at CTC and Domashny (particularly for foreign movies and Russian-produced series and shows);
•  the acquisition of the DTV Group ($3.2 million) and an interest in the Channel 31 Group ($1.4 million);
•  impairment charges ($2.5 million in the third quarter of 2008 up from $1.3 million in the same period last year);
•  the change in programming rights amortization rates for Russian-produced series with twenty or more episodes.

Starting from the second quarter of 2008, CTC Media has changed its previous programming rights amortization policy for Russian-produced series with twenty or more episodes. The company’s previous policy was to amortize 60% after the first run, 30% after the second run and 10% after the third run when the license provides for three or more runs. After introduction of the new programming rights amortization policy, series with twenty or more episodes are amortized 75% after the first run and 25% after the second run, which is reflective of the company’s anticipated programming schedule. The effect of the change in amortization policy amounted to an additional $1.8 million of amortization of programming rights expense in the three months ended September 30, 2008.

Depreciation and amortization expense decreased from $7.6 million to $3.9 million when comparing the three months ended September 30, 2007 and 2008, principally due to a change in the way in which the company accounts for its broadcasting licenses. As of January 1, 2008, CTC Media no longer amortizes broadcasting licenses over a 5-year useful life but treats them as intangible assets with an indefinite life and tests them annually for impairment.

Consolidated OIBDA increased 72.2% to $55.0 million for the third quarter of 2008 compared to $32.0 million in the third quarter of 2007. The consolidated OIBDA margin for the quarter was 38.4% compared to 34.0% in the corresponding quarter of 2007. Organic OIBDA for the three months ended September 30, 2008 was $51.3 million (up 60.5% from the same period last year), corresponding to a 40.1% organic OIBDA margin.

Consolidated net income increased 20.5% to $21.0 million for the three months ended September 30, 2008 from $17.4 million for the three months ended September 30, 2007. Organic net income for the quarter was $20.6 million, up 18.4% from the same period last year.

Fully diluted income per share was $0.13 for the three months ended September 30, 2008, compared to $0.11 for the three months ended September 30, 2007.

Results for the Nine Months Ended September 30, 2008

US$ million

Organic Results

 

 


Non-Organic Results

 


Total CTC Media Group

Revenues

420.8

 


32.0

 


452.8

OIBDA

175.0

 


8.7

 


183.7

OIBDA margin

41.6%

 


27.2%

 


40.6%

Net Income

109.2

 


2.3

 


111.5

CTC Media's total operating revenues for the nine months ended September 30, 2008 increased 45.9% to $452.8 million from $310.4 million for the nine months ended September 30, 2007. The increase in revenues reflects the continued growth of the Russian television advertising market resulting in higher advertising rates, and the impact of acquisitions, primarily of the DTV Group acquired in the second quarter of 2008, Channel 31 in Kazakhstan acquired in the first quarter of 2008, and several regional stations acquired in 2007. The company estimates that the appreciation of the Russian ruble against the US dollar resulted in an approximate 7.6% increase in total operating revenues when comparing the nine-month periods.

CTC Media’s organic operating revenues, which include the combined operating revenues of CTC Network, Domashny Network, CTC Television Station Group and Domashny Television Station Group, increased 35.6% to $420.8 million in the first nine months of 2008 from $310.4 million in the first nine months of 2007.

CTC Media’s non-organic revenues, which include the combined operating revenues from the DTV Group, the CIS Group, and Soho Media and Costafilm production companies, were $32.0 million in the first nine months of 2008. Out of these revenues, the DTV Group contributed $25.7 million, the Channel 31 Group contributed $6.0 million, and the production companies contributed $0.3 million.

Consolidated total operating expenses for the nine months ended September 30, 2008 increased 37.9% to $278.7 million from $202.1 million for the nine months ended September 30, 2007. In absolute terms, total operating expenses went up primarily due to increased direct operating expenses mainly associated with transmission and maintenance; increased selling, general and administrative expenses primarily associated with the DTV Group, the CIS Group and the production companies; and increased programming rights amortization expense, which was driven by higher programming costs, introduction of a new, more accelerated programming rights amortization policy for certain types of Russian-produced series starting in the second quarter of 2008, and increased impairment charges.

Impairment charges increased from $3.1 million to $11.7 million when comparing the nine months ended September 30, 2007 and 2008. The increase in impairment charges was mainly due to the relative underperformance of four Russian series launched earlier in 2008 on CTC.

The increase in total operating expenses was partially offset by a decrease in depreciation and amortization expense from $19.5 million in the first nine months of 2007 to $9.6 million in the first nine months of 2008, principally due to a change in the way in which the company accounts for its broadcasting licenses starting from January 1, 2008.

Consolidated OIBDA increased 43.9% to $183.7 million for the first nine months of 2008 compared to $127.7 million for first nine months of 2007. The consolidated OIBDA margin for the nine-month period was 40.6% compared to 41.1% in the same period last year. Organic OIBDA for the nine months ended September 30, 2008, was $175.0 million (up 37.0% from the same period last year), corresponding to a 41.6% organic OIBDA margin.

Consolidated net income increased 46.3% to $111.5 million for the nine months ended September 30, 2008 from $76.2 for the nine months ended September 30, 2007. Organic net income for the nine-month period was $109.2 million, up 43.3% from the same period last year.

Fully diluted income per share was $0.70 for the nine months ended September 30, 2008, compared to $0.48 for the nine months ended September 30, 2007.

Guidance

For the full year ending December 31, 2008, the company revises its guidance for consolidated total operating revenue to the range of $630 to $660 million, with a consolidated OIBDA margin in the range of 40% - 44%.

Conference Call

The company will also host a conference call to discuss its third quarter 2008 financial results today, Thursday, October 30, 2008, at 9:00 a.m. ET, (4:00 p.m. Moscow time, 1:00 p.m. London Time). To access the conference call, please dial +1 973 582 2741 (international) or 810 800 2531 1012 (Russia), and reference pass code 67287873. A live webcast of the conference call will also be available on the investor relations portion of the company's corporate web site, located at www.ctcmedia.ru/investors. A replay of the conference call will be available through Thursday, November 6, 2008, at midnight ET. The replay can be accessed by dialing +1 706 645 9291 or +1 800 642 1687. The passcode for the replay is 67287873. The webcast will also be archived on the company’s web site for two weeks.

About CTC Media, Inc.

CTC Media is a leading independent media company in Russia. It owns and operates the CTC television network, whose signal is carried by more than 350 affiliate stations, including 21 owned-and-operated stations; the Domashny television network, whose signal is carried by over 250 affiliate stations, including 13 owned-and-operated stations; and the DTV television network, whose signal is carried by a number of affiliate stations, including 4 owned-and-operated stations. CTC Media owns two TV content production companies: COSTAFILM and SOHO MEDIA, and operates Channel 31 in Kazakhstan and TV companies in Uzbekistan and in Moldova. The company’s common stock is traded on The NASDAQ Global Sel ect Market under the symbol: “CTCM”. For more information on CTC Media, please visit: www.ctcmedia.ru.

# # #

Contacts:

CTC Media, Inc. Angelika Larionova (media)
Ekaterina Ostrova, Ekaterina Tsukanova (investors)
+7 495 785 6333

Brainerd Communicators, Inc.
Jenna Focarino (media)
Michael Smargiassi (investors)
+1 212 986 6667

# # #

Certain statements in this press release that are not based on historical information are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which include, among other things, guidance on the company’s projected total operating revenues and OIBDA margin for the year ending December 31, 2008 on a consolidated basis, the impact the current unfavorable macroeconomic outlook in Russia may have on the size of the Russian television advertising market in 2009, the company’s ability to withstand challenging market conditions, expectations regarding the performance of the company’s fall 2008 programming season at its networks and the potential for future growth in Moldova’s television advertising market, reflect the company's current expectations concerning future results and events. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of CTC Media to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The potential risks and uncertainties that could cause actual future results to differ fr om those expressed by forward-looking statements include, among others, the company’s ability to deliver audience share, particularly in primetime, to its advertisers; changes in the size of the Russian television advertising market; free-to-air television remaining a significant advertising forum in Russia; the company’s reliance on a single television advertising sales house for substantially all of its revenues; and restrictions on foreign involvement in the Russian television business. These and other risks are described in the "Risk Factors" section of CTC Media's quarterly report on Form 10-Q filed with the SEC on July 30, 2008. Other unknown or unpredictable factors could have material adverse effects on CTC Media's future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed herein may not occur. You are cautioned not to place undue reliance on these forward-looking statements. CTC Media does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.

# # #

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Third Quarter 2008 Results Press Release (pdf, 65KB)