6-K 1 kr6k_innova.txt FORM 6-K FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Report Of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of October, 2003 Commission File Number: 333-7484 INNOVA, S. de R.L. de C.V. --------------------------------------------------------- (Translation of registrant's name into English) Insurgentes Sur 694 Piso 8, Col. Del Valle 03100 Mexico, D.F. Mexico ------------------------------------------------------------------------------ (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F X Form 40-F ----- ----- Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes No X ----- ----- If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- . SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INNOVA, S. de R.L. de C.V. ----------------------------------- (Registrant) Date: October 23, 2003 By /s/ Carlos Ferreiro Rivas -------------------------------- Name: Carlos Ferreiro Rivas Title: Chief Financial Officer [LOGO - SKY] FOR IMMEDIATE RELEASE --------------------- INNOVA, S. de R. L. de C.V. REPORTS THIRD QUARTER 2003 RESULTS - SUBSCRIBER BASE GROWS TO 826,100 - - NET REVENUES INCREASED 5.3% - - EBITDA INCREASED 10.8% TO PS. 293.6 MM - - INNOVA SUCCESSFULLY ISSUED US$300 MM 10 YEAR SENIOR NOTES TO PARTIALLY REFINANCE ITS DEBT - - US$391 MM OF SHAREHOLDER LOANS AND ACCRUED INTEREST WERE CAPITALIZED - - THE COMPANY WAS UPGRADED BY BOTH RATING AGENCIES - ------------------------------------------------------------------------------ o The number of gross active SUBSCRIBERS increased 12.7% to 826,100 from 732,700 in the third quarter of 2002. o REVENUES in the third quarter increased 5.3% as compared to the same period of 2002. o EBITDA for the third quarter of 2003 increased 10.8% to Ps. 293.6 million from Ps. 265.0 million for the same period of 2002. o The Company successfully issued US$300.0 MILLION 10 YEAR SENIOR NOTES AT 9.375% generating US$9.3 million annual cash interest expense savings. o SHAREHOLDER LOANS of approximately US$310 million plus accrued interest of approximately US$81 million were capitalized. o Standard & Poor's and Moody's upgraded Innova from B-/B3 (STABLE/STABLE) to B+/B2 (POSITIVE/STABLE). ------------------------------------------------------------------------------ Mexico City, October 21, 2003. INNOVA, S. DE R.L. de C.V., the provider of direct-to-home (DTH) satellite television services under the SKY brand name and the pay-TV market leader in Mexico as measured by the number of subscribers, announced its unaudited consolidated results for the third quarter ended September 30, 2003. The attached results have been prepared in accordance with Mexican GAAP in constant Mexican pesos in purchasing power as of September 30, 2003. SUBSCRIBER BASE The number of gross active subscribers increased --------------- to 826,100, including 46,850 commercial subscribers, as of September 30, 2003; this represents a 12.7% increase from 732,700, including 33,700 commercial subscribers as of September 30, 2002; or an increase of approximately 93,400 gross active subscribers. We believe the increase in the subscriber base was primarily due to the sustained growth in customer activations in response to the high quality and variety of our programming content, exclusive events and our aggressive marketing campaigns. The increase in subscriber base was partially offset by subscriber cancellations during this quarter, primarily due to the continuing weakness in the Mexican economy. Nevertheless, we continue to experience a decline in the rate of subscriber cancellations as compared to the previous year. PROGRAMMING CONTENT During the third quarter of 2003, Sky continued to ------------------- enhance its programming content, by adding the following offerings: o Big Brother VIP2, a 57-day live reality show broadcast on a pay-TV exclusive basis, 24 hours a day, with fourteen well-known media, sports and entertainment participants; o The pay TV-exclusive broadcast of the US Open 2003 Tennis Tournament; o The pay TV-exclusive broadcast of certain matches of the Mexican 2003 Opening Soccer Tournament; o The pay TV-exclusive transmission of certain matches of the Mexican Baseball league; and o LPGA, US PGA and US Senior PGA Golf Tournaments. PRICE AND PROMOTIONS Innova's current installation fee is Ps. 1,099. -------------------- However, residential subscribers who agree to pay the monthly programming fee via automatic charge to a credit card, pay only Ps. 99. We continue to improve our subscriber base quality, by among other things, encouraging new and current subscribers to pay their monthly programming services through automatic charge to a credit card. DEBT REFINANCING On September 19, 2003 we successfully closed a ---------------- US$300.0 million 10-year Senior Notes offering with a coupon rate of 9.375%. The net proceeds of the offering were used to redeem on October 20, 2003 US$287.0 million in aggregate principal amount of our 12 7/8% senior notes due 2007, and to pay a redemption premium, taxes, fees and expenses related to the transaction. This transaction improves Innova's debt profile and benefits the Company in primarily two ways: o US$9.3 million gross cash interest expense savings per year by the fact that the interest rate of the new bond is lower in 350 bps, and o Extends the maturity of the majority of our debt. The new debt profile of Innova includes US$88.0 million of the 12 7/8% Senior Notes due 2007 and US$300.0 million of the 9.375% Senior Notes due 2013. SHAREHOLDER LOANS CAPITALIZATION Effective as of September 9, 2003, our owners -------------- capitalized all loans made by them or any of their affiliates to us. The amount of the loans and accrued interest capitalized as of September 9, 2003 was approximately Ps. 4.3 billion (or US$390.9 million); including approximately Ps. 3.4 billion (or US$309.9 million) of principal and Ps. 0.9 billion (or US$81.0 million) of accrued interest. After giving effect to the capitalization, our shareholders Televisa, News Corporation and Liberty Media continue to indirectly own 60%, 30% and 10% of Innova's outstanding membership interests, respectively. From the Company's inception through September 30, 2003 and considering the capitalization explained above, our shareholders have contributed a total of US$539.9 million to Innova in equity. This includes initial equity of US$149.0 million, loans capitalized of US$309.9 and accrued interest of US$81.0 million. RATINGS AGENCIES On September 4, 2003 Standard & Poor's upgraded ---------------- Innova's foreign currency corporate credit ratings from B-/Stable to B+/Positive. On September 25, 2003 Moody's upgraded Innova's ratings from B3/Stable to B2/Stable. We believe these ratings upgrades are primarily due to our improving operational and financial performance and our strong shareholder sponsorship. FINANCIAL REVIEW ---------------- FINANCIAL HIGHLIGHTS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 STATEMENTS PREPARED UNDER MEXICAN GAAP (UNAUDITED) MILLION OF CONSTANT MEXICAN PESOS AS OF SEPTEMBER 30, 2003 THREE MONTHS ENDED SEPTEMBER 30, ----------------------------------------------- 2003 % Margin 2002 % Margin VAR % Net Revenues 932 100 885 100 47 5 Cost of Sales 281 30 257 29 24 9 ----- ----- ----- Gross Profit 651 70 628 71 23 4 Selling 199 21 189 21 10 5 Operations 130 14 137 15 (7) (5) Administrative 28 3 37 4 (9) (24) ----- ----- ----- Total Expenses 357 38 363 41 (6) (2) ----- ----- ----- EBITDA(1) 294 32 265 30 29 11 EBIT(2) 92 10 45 5 47 104 NINE MONTHS ENDED SEPTEMBER 30, ----------------------------------------------- 2003 % Margin 2002 % Margin VAR % Net Revenues 2,775 100 2,660 100 115 4 Cost of Sales 857 31 817 31 40 5 ----- ----- ----- Gross Profit 1,918 69 1,843 69 75 4 Selling 633 23 653 25 (20) (3) Operations 342 12 387 15 (45) (12) Administratite 86 3 96 4 (10) (10) ----- ----- ----- Total Expenses 1,061 38 1,136 43 (75) (7) ----- ----- ----- EBITDA(1) 857 31 707 27 150 21 EBIT(2) 257 9 (11) (0) 268 n/a (1) EBITDA is defined as operating income before depreciation and amortization. (2) EBIT is defined as operating income before integral cost of financing and taxes. NET REVENUES Net revenues of Ps. 931.8 million for the three months ended September 30, 2003, increased by Ps. 47.1 million or 5.3% as compared to the same period of the prior year, mainly due to the growth of our subscriber base. Net revenues of Ps. 2,775.0 million for the nine months ended September 30, 2003, increased by Ps. 115.2 million or 4.3% as compared to the prior year, mainly due to the sustained growth of our subscriber base. COST OF SERVICES AND SALES Cost of services and sales increased by Ps. 23.9 million or 9.3% to Ps. 280.7 million for the three months ended September 30, 2003 as compared to the same period of the prior year; mainly due to higher costs directly resulting from the devaluation of the peso against the US dollar, as compared to the prior year. Cost of services and sales increased by Ps. 40.6 million or 5.0% to Ps. 857.2 million for the nine months ended September 30, 2003, as compared to the prior year. This increase was due to higher subscriber activations and related costs, as well as higher costs directly resulting from the devaluation of the peso against the US dollar, as compared to the prior year. OPERATING EXPENSES Total expenses of Ps. 357.5 million for the three months ended September 30, 2003, decreased by Ps. 5.4 million or 1.5% as compared to the same period of the prior year, mainly due to lower cost of reactivation and recovery of IRDs, headcount and administrative expenses, but which were partially offset by higher marketing and promotions expenses. Total expenses of Ps. 1,060.7 million for the nine months ended September 30, 2003, decreased by Ps. 75.0 million or 6.6%, as compared to the prior year, this result was mainly due to lower cost of free special events, headcount and administrative expenses. EBITDA EBITDA of Ps. 293.6 million for the three months ended September 30, 2003, improved by Ps. 28.6 million or 10.8%, as compared to the same period of 2002, mainly due to higher revenues and lower operating expenses, which were partially offset by higher cost of services and sales, as described above. As a result, EBITDA margin increased from 30.0% to 31.5% as compared to the third quarter of 2002. EBITDA of Ps. 857.1 million for the nine months ended September 30, 2003, improved by Ps. 149.7 million or 21.2%, as compared to the prior year due to higher revenues and lower operating expenses, which were partially offset by higher cost of services and sales, as explained above. As a result, EBITDA margin increased from 26.6% in 2002, to 30.9% in 2003. EBIT OPERATING INCOME EBIT improved by Ps. 47.5 million or 106.7% to Ps. 92.0 million in the three months ended September 30, 2003, as compared to Ps. 44.5 million during the same period of 2002. As a result, EBIT margin increased to 9.9% in the third quarter of 2003 from 5.0% in the third quarter of 2002. EBIT improved by Ps. 268.0 million to Ps. 256.7 million in the nine months ended September 30, 2003, as compared to a negative Ps. (11.3) million for the same period in the prior year. NET LOSS Innova reported a net loss of Ps. (385.6) million for the three months ended September 30, 2003, as compared to a net loss of Ps. (340.7) million in the same period of 2002. This result was primarily due to the foreign exchange loss of Ps. (483.1) million in this third quarter of 2003 as compared to a foreign exchange loss of Ps. (250.6) million during the third quarter of 2002. Innova reported a net loss of Ps. (594.1) million for the nine months ended September 30, 2003, as compared to a net loss of Ps. (1,456.6) million for the same period in the prior year. The Company's foreign exchange loss in the first nine months of 2003 was primarily due to the lower depreciation of the Mexican peso versus the U.S. dollar of approximately 5.2% from December 31, 2002 to September 30, 2003 versus a depreciation of the Mexican peso versus the U.S. dollar of approximately 11.4% from December 31, 2001 to September 30, 2002. Additional devaluations of the peso will likely affect our liquidity and results of operations, considering our substantial U.S. dollar- denominated indebtedness, operating costs and expenses, while our revenues are primarily peso-denominated. Any decrease in the value of the peso against the U.S. dollar could cause us to incur foreign exchange losses, which would reduce our net income. FUNDING FROM SHAREHOLDERS Innova did not require additional funding from its shareholders during the third quarter of 2003. This was mainly due to positive cash flow from operations and the current balance of cash resources available. The Company has not required shareholder funding for six straight quarters and does not expect to require shareholder funding in the fourth quarter of 2003. INNOVA, S. DE R.L. DE C. V., is a joint venture indirectly owned by Grupo Televisa, S.A., a Mexican corporation ("Televisa"), The News Corporation Limited, an Australia corporation ("News Corporation"), and Liberty Media International Inc., a Delaware corporation ("Liberty Media"), (formerly known as Tele-Communications International, Inc.). For more information, please visit www.sky.com.mx. GRUPO TELEVISA S.A., is the largest media company in the Spanish-speaking world, and a major player in the international entertainment business. It has interests in television production and broadcasting, programming for pay television, international distribution of television programming, direct-to-home satellite services, publishing and publishing distribution, cable television, radio production and broadcasting, professional sports and show business promotions, paging services, feature film production and distribution, dubbing, and the operation of a horizontal Internet portal. Grupo Televisa also has an unconsolidated equity stake in Univision, the leading Spanish-language television company in the United States. For more information, please visit www.televisa.com. NEWS CORPORATION, is a diversified international media and entertainment company with operations in seven industry segments: filmed entertainment; television; cable network programming, magazines and inserts; newspapers; book publishing, and other. The activities of News Corporation are conducted principally in the United States, the United Kingdom, Australia, Asia and the Pacific Basin. For more information, please visit www.newscorp.com. LIBERTY MEDIA INTERNATIONAL, owns and operates broadband cable television and telephony distribution networks and is a provider of diversified programming services in Europe, Latin America and Asia. For more information, please visit www.libertymedia.com. This press release contains forward-looking statements regarding the Company's results and prospects. Actual results could differ materially from these statements. The forward-looking statements in this press release should be read in conjunction with the factors described in "Item 3. Risk Factors" in the Company's Annual Report on Form 20-F, which among others, could cause actual results to differ materially from those contained in any oral statements made by authorized officers of the Company. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Contact: CARLOS FERREIRO Chief Financial Officer Innova, S. de R.L. de C.V. Insurgentes Sur No.694 Col. del Valle Mexico City, 03100 (5255) 5448-4131 cferreiro@sky.com.mx INNOVA, S. DE R.L. DE C.V. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 STATEMENTS PREPARED UNDER MEXICAN GAAP (THOUSANDS OF MEXICAN PESOS IN PURCHASING POWER AS OF SEPTEMBER 30, 2003)

INNOVA, S. DE R.L. DE C.V. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2003 AND 2002 (UNAUDITED) STATEMENTS PREPARED UNDER MEXICAN GAAP (THOUSANDS OF MEXICAN PESOS IN PURCHASING POWER AS OF SEPTEMBER 30, 2003)

INNOVA S DE RL 6-K