OREANDA-NEWS. On August 06, 2009 CTC Media, Inc. (“CTC Media” or “the Company”) (NASDAQ: CTCM), Russia’s leading independent media company, announced its unaudited consolidated financial results for the second quarter and six months ended June 30, 2009, reported the press-centre of CTC Media.

SECOND QUARTER FINANCIAL HIGHLIGHTS

Total revenues down 34% year-on-year in US dollar terms (down 10% year-on-year in ruble terms) to US 113.9 million

Russian advertising revenues down 12% year-on-year in ruble terms

Total operating expenses down 32% year-on-year in US dollar terms (down 7% year-on-year in ruble terms) to US 70.1 million

OIBDA of US 46.5 million with an OIBDA margin of 40.8%

Net income of US 30.3 million, fully diluted earnings per share of US 0.19

Net cash position of US 35.0 million

SECOND QUARTER OPERATING HIGHLIGHTS

Average combined 4+ audience share in Russia up year-on-year to 13.4% from 12.6%

Target audience viewing shares up for all three Russian networks on a sequential and year-on-year basis

CTC was the most watched channel in Russia in prime time by 25-54 year olds with kids for the first time

CTC was the third most watched channel in Russia by 6-54 year olds for the first time since 2006

Anton Kudryashov, Chief Executive Officer of CTC Media, commented: “Despite the fact that the ongoing weak economic environment adversely impacted advertising spending in the second quarter, we have continued to significantly outperform the market. Our Russian advertising revenues, which account for over 90% of total revenues, were down 12% year-on-year in ruble terms in the second quarter, compared to an estimated 21% decline in the overall Russian television advertising market according to Video International. The year-on-year decline in the consolidated results again reflected the substantial year-on-year weakening of the ruble and other operating currencies against the US dollar reporting currency.”

“Our outperformance of the market was driven by healthy sell-out and power ratios, as well as rising target audience viewing shares for our three complementary Russian networks. At the same time we managed to substantially reduce our operating costs year-on-year and the measures that we have taken in 2008 and into 2009 have enabled us to maintain an OIBDA margin of over 40%. Furthermore, we remain in a net cash financial position.”

“Despite the limited levels of forward visibility, we do expect to continue to outperform the Russian television advertising market in the second half of 2009. We also continue to expect organic costs to be flat year-on-year in ruble terms for the full year, despite the fact that we are now investing in programming for the Fall schedules, in order to build on the momentum of our growing audience shares and to enhance our competitive position.”

Total operating revenues for the three months ended June 30, 2009 were down 34% year-on-year in dollar terms. The second quarter results in both 2008 and 2009 included full quarterly contributions by DTV Group in Russia and Channel 31 Group in Kazakhstan, which were both acquired in the first half of 2008.

The reported decline in revenues reflected the underlying weakness in the advertising markets, as well as the year-on-year depreciation of the Company’s principal operating currency (the ruble) against the Company’s reporting currency (the US dollar). The depreciation had a negative impact of approximately 27% on the Company’s ruble denominated sales. Advertising sales in Russia, which accounted for 93% of total second quarter revenues in 2009 and 95% in 2008, were down 12% year-on-year in the second quarter in ruble terms.

The year-on-year development in advertising revenues for the Russian Television Station Groups reflected the sharper decline in the regional advertising markets in Russia when compared with the national advertising market, and was due to the weighting of spending by large advertisers to national campaigns.

CIS Group revenues were up 65% year-on-year in the second quarter of 2009 due to increased advertising prices and sell-out rates for Channel 31 in Kazakhstan, which were offset by the year-on-year depreciation of the Kazakh tenge against the US dollar. Channel 31 generated over 90% of CIS Group revenues in the quarter.

Each of the Russian networks delivered higher target audience viewing shares in the second quarter, both on a sequential and year-on-year basis.

The flagship CTC channel substantially increased its target audience share in the second quarter and, for the first time since 2006, was the third most watched channel by 6 to 54 year olds. CTC was also the most watched channel in prime time by 25 to 54 year olds with kids, and maintained its overall position as the fourth most watched free-to-air channel in Russia. The rising ratings were driven by the continued success of the ‘Daddy’s Girls’ and ‘Ranetki’ series in prime time and supported by a well-balanced broader programming schedule.

Domashny’s audience share also increased year-on-year and quarter-on-quarter due to the strong performance of the CTC hit series ‘Born Not Pretty’, as well as the late prime time weekday slot featuring foreign series such as ‘Desperate Housewives’.

DTV has been focused since January 2009 on the 25-54 year old target group. The share of viewing in the revised demographic increased in the second quarter following the continued success of locally produced ‘Marital Fiction’, as well as the late prime time slots for Russian and foreign criminal investigation and action formats such as ‘The Investigators’, ‘The Trace’, and ’Law and Order’.

Total operating expenses for the three months ended June 30, 2009 were down 32% year-on-year in dollar terms. The reported decrease in expenses reflected the year-on-year reduction in programming amortization expenses, as well as the depreciation of the Company’s ruble and other operating currencies against the US dollar reporting currency. Total operating expenditure was down 7% year on year in ruble terms in the second quarter and included full quarterly contributions from DTV Group and Channel 31 Group in both 2008 and 2009.

Direct operating expenses were down 25% year-on-year in the second quarter in dollar terms, while selling, general and administrative costs were down 26%.

Programming expenses decreased by 33% year-on-year and represented 36% of revenues, which was unchanged from the second quarter of 2008 as a percentage of revenues. The year-on-year decrease reflected a reduction in programming impairment charges from US 4.0 million to US 1.0 million, and a US 1.5 million reduction in amortization charges due to the changes in the Company’s amortization policy for certain types of Russian-produced programming from the beginning of 2009. When excluding the effect of the amortization policy changes, programming expenses were down 31% year-on-year in the second quarter in US dollar terms.

The 68% year-on-year decline in sublicensing and own production costs primarily reflected the lower cost of in-house produced series and sitcoms that were sold to third party broadcasters in Ukraine.

Consolidated OIBDA was therefore lower year-on-year at US 46.5 million (Q2 2008: US 73.4 million) but the OIBDA margin declined by less than two percentage points to 40.8% (Q2 2008: 42.5%).

Group depreciation and amortization charges decreased by 21% year-on-year to US 2.7 million (Q2 2008: US 3.4 million) in the second quarter, and consolidated operating income totaled US 43.8 million (Q2 2008: US 70.0 million).

The Company’s pre-tax income amounted to US 41.8 million (Q2 2008: US 70.8 million) in the quarter. The effective tax rate decreased year-on-year in the second quarter to 26% (Q2 2008: 30%) mainly due to the decrease in statutory income tax rates in Russia (from 24% to 20%) and Kazakhstan (from 30% to 20%) from the beginning of 2009.

Consolidated net income attributable to CTC Media, Inc. stockholders therefore totaled US 30.3 million (Q2 2008: US 48.8 million) in the second quarter and fully diluted earnings per share amounted to US 0.19 (Q2 2008: US 0.31).

Cash Flow
The Company’s net cash flow from operations totaled US 50.0 million in the first six months of 2009 (first six months of 2008: US 66.9 million) and reflected the net effect of lower advertising sales and lower expenses in the first half of 2009.

Cash used in investing activities totaled US 18.7 million during the first six months of 2009 (first six months of 2008: US 320.3 million) and included US 11.0 million in payments related to the acquisitions of Costafilm and Soho Media, as well as the purchasing of equipment and software for the Company’s new digital platform technology center in Moscow. The investments in the first half of 2008 included the acquisition of the DTV Group in Russia, the Channel 31 Group in Kazakhstan, the Costafilm and Soho Media production companies in Russia, and a number of local owned-and-operated stations in Russia.

Cash used for financing activities amounted to US 35.7 million in the first half of the year (first six months of 2008: US 1.8 million). This included a US 33.8 million part repayment of the syndicated loan, which the Company drew down in July 2008 to finance the acquisition of DTV Group.

The Company’s cash and cash equivalents amounted to US 91.7 million at June 30, 2009, compared to US 98.1 million at the end of 2008 and US 62.5 million at June 30, 2008.

Borrowings
The Company’s total borrowings and accrued interest amounted to US 56.7 million (June 30, 2008: US 155.5 million) at the end of the reporting period, compared to US 90.6 million at the end of 2008. The Company therefore had a net cash position, which is defined as cash and cash equivalents less interest bearing liabilities, of US 35.0 million (June 30, 2008: net debt of US 93.0 million) at the end of the reporting period, compared to a net cash position of US 7.5 million at the end of 2008.