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Headline scores with net annual income of $2.8 million
11/25/2004

 
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Independent Broadcasters
TV
TORONTO - The Score Television Network has reported an operating profit of $2.8 million for the year ended August 31, 2004.

HIGHLIGHTS

� Net income from continuing operations before interest, income taxes, depreciation and amortization for Headline Media Group Inc. ("HMG") for the year ended August 31, 2004 was $0.6 million, compared with a loss of $1.8 million last year - an improvement in operating performance of $2.4 million.

� Net income before interest, income taxes, depreciation and amortization for The Score Television Network for the year ended August 31, 2004 was $2.8 million, compared to $39,000 in the prior year - an improvement in operating performance of $2.8 million.

� On January 21, 2004, the CRTC renewed The Score's broadcasting licence for a full term, through August 31, 2010, and increased The Score's authorized basic wholesale rate to $0.14 - an increase of 40%.

� Borrowings under HMG's credit facilities decreased by $2.4 million during the year.

� HMG sold the Canadian operations of PrideVision TV, its wholly-owned subsidiary, during the year and generated a gain on disposition of $1.6 million.

� The company will pursue growth through the development of related sports media properties and applications, including interactive initiatives.

� The company anticipates continued growth in revenue and profitability for 2005 and plans to focus on growing its primary asset, The Score Television Network.
The Score Television Network

Revenue for The Score increased by $0.7 million or 3.7% to $19.9 million compared to $19.2 million in the prior year.

Subscriber fees increased by $1.1 million or 16.3% to $7.6 million compared to $6.5 million for the same period last year reflecting an increase in the average number of paying subscribers for the year at The Score, and the effects of a new wholesale rate structure.

On January 21, 2004, The Score received CRTC approval of its licence renewal for a full term, and that approval included a new authorized basic wholesale rate of $0.14, an increase of 40% from The Score's previously authorized basic wholesale rate of $0.10. The Score's principal conditions of licence, relating to Canadian programming expenditures, Canadian content exhibition, and the exhibition of live event programming remain unchanged.

Subscriber revenue increased in the third and fourth quarters of fiscal 2004 as The Score's rate increase was implemented with several broadcast distribution undertakings during that time. Negotiations with other broadcast distribution undertakings were underway at year-end and subscriber revenue increases from implementing the new wholesale rate structure with those broadcast distribution undertakings initiatives are anticipated in 2005 and beyond.

Advertising revenue for the year ended August 31, 2004 totaled $12.4 million compared to $12.7 million in the prior year, representing a decrease of $0.3 million. Enhanced programming, combined with increased marketing, resulted in a year-over-year increase in paid advertising of $0.7 million; however, this increase was offset by a decrease in non-cash barter advertising and the absence of program sub-licensing revenue.

At the end of August 2004, The Score had approximately 5.4 million paying subscribers.
Operating expenses for the year were $17.2 million, compared to $19.2 million in the prior year, a decrease of $2.0 million over the prior year. The decrease in operating expenses in the year ended August 31, 2004 reflects a $3.3 million decrease in program rights fees partly offset by $1.1 million increase in other program-related expenses and a $0.2 million increased sales and marketing expenses, compared to the prior year.

The decrease in program rights fees primarily reflects a reduction in fees related to World Wrestling Entertainment rights fees, with some increased rights fees associated with new programming such as Expos baseball and the National Lacrosse League. The increase in other program-related expenses was attributable to improved coverage of sports highlights and special events.

Income before interest, depreciation and amortization for the year was $2.8 million, compared to $39,000 in the prior year.

St. Clair

Revenue for St. Clair group decreased by $6.0 million or 62.8% to $3.5 million compared to $9.5 million in the prior year.

St. Clair did not renew the publishing rights for Maple Leaf Sports and Entertainment's programs for the Toronto Maple Leafs and Toronto Raptors 2003/04 season. As a result, sales contracts that included packaged advertising did not renew. In addition, St. Clair restructured its sponsorship contracts for the Canadian Curling Association (CCA) and World Curling Federation (WCF), and as a result, revenues were expected to decline. Both of these issues resulted in the reduction in St. Clair's advertising revenue.

Operating expenses for the year were $3.4 million reflecting a decrease of $6.1 million over the prior year's expenses of $9.5 million. The decrease in operating expenses reflects the reduction in production and printing expenses for magazines due to the lost contracts, the restructuring of the contracts with the CCA and WCF for producing the curling properties, and significant cost containment initiatives.

Income before interest, depreciation and amortization for the year was $132,000 compared to a loss of $21,000 in the prior year.

Corporate

Operating expenses for the year were $2.4 million or $0.1 million higher than the prior year's expenses of $2.3 million. The increase in operating expenses reflects increased insurance expenses and professional fees.

Operating expenses included executive compensation, public relations costs and professional fees and other general and administrative expenses.

Loss before interest, depreciation and amortization for the year was $2.4 million, compared to $1.9 million in the prior year. The prior year's loss includes a $0.5 million gain on the sale of an investment.


 
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